The options for start-up and small businesses - EdexcelLimited and unlimited liability
There are a number of different options when setting up a new or small business. These may depend on the size of the business, the number of owners and the level of risk owners are willing to take.
Limited liability means that the business owner or owners are only responsible for business debt A sum of money owed by an individual or business to another person or business. up to the value of their financial investment in the business. This means that a creditorA person who is owed money by a business. can only take assets or finances belonging to the company. Limited liability only applies to certain types of business, such as private limited companies A private limited company has limited liability. Often, these types of business have ‘Ltd’ after their business name. .
Unlimited liability
Unlimited liability means that the business owner or owners are personally responsible for all of the debts of the business, no matter what the value.
The main difference between unlimited and limited liability is the level of risk that a business is willing to take. Having unlimited liability is a bigger risk for any business than having limited liability.
