Limited Liability
Definition: Limited liability is where a company’s shareholders are not personally responsible for the company’s debts. Instead, their financial risk is limited to the amount they have invested in the business.
Business Forms with Limited Liability:
- Incorporated Businesses: These are businesses that are separate legal entities from their owners.
- Private Limited Companies (Ltd): Owned by private shareholders.
- Public Limited Companies (PLC): Shares can be traded publicly on the stock exchange.
Unlimited Liability
Definition: Unlimited liability is where business owners are personally responsible for all of the business’s debts. This means that if the business cannot pay its debts, the personal assets of the owners can be seized to cover the liabilities.
Business Forms with Unlimited Liability:
- Unincorporated Businesses: These are businesses that are not separate legal entities from their owners.
- Sole Traders: A single individual owns and runs the business.
- Partnerships: Two or more individuals own and run the business.
- Unincorporated Businesses: These are businesses that are not separate legal entities from their owners.