Limited Liability

a business owned by a solitary individual who has unlimited liability for its debt is called a:
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less recession on limited liability and unlimited liability we start first with unlimited liability so unlimited liability applies to an incorporated businesses such as sole traders or partnerships and they will have unlimited liability on our easiest way to remember it this is where the owner and the business is the same legal entity its the same thing the owner and

the business is the same thing therefore the owner is responsible for all the debts the business incurs because theyre the same thing an example the business fails with two hundred thousand pounds worth of debt to the bank the owners personal assets such as their house or their car are now liable they could be taking they are at risk

so therefore having unlimited liability is a disadvantage its a con of being an unincorporated business such as a sole trader or a partnership now moving on to limited liability limited liability is for incorporated businesses incorporated businesses such as private limited companies or public limited companies they have limited liability and this is where the owner and the business are

different separate different legal entities then for the shareholders assets are not at risk in the event of the business failing such as owing large loans or creditors to potentially suppliers an example so share modest losses are limited to how much they invested into the company in this case so therefore we think were to invest ten thousand pounds into

and that company becomes insolvent the maximum they could lose is ten thousand pounds their personal assets are not at risk because they are different the owner in this case the shareholder is a different legal entity to the business and that is why a limited liability that applies to incorporates businesses is an advantage is a pro of incorporated businesses

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