Unlimited liability
Sole traders and ordinary partnerships have unlimited liability.
There is no difference in law between the individual and the business.
Unlimited liability refers to the legal obligations general partners and sole proprietors have.
They are liable for all business debts if the business can't pay its liabilities.
Creditors can take individuals to court to recover debts.
Bailiffs can recover amounts that are owed from peoples personal belongings.
If people cannot pay they can be made bankrupt.
See: https://youtu.be/sc6n3u1kWbE
Limited liability:
The legal duty to pay debts is the responsibility of the business not the owners.
Applies to a ltd and a plc.
Finance appropriate for unlimited liability businesses:
NOT SHARE CAPITAL (EQUITY).
1. Owners capital
2. Bank finance
3. Leasing
4. Trade credit
and the most important source of finance which is retained profit.
Finance appropriate for limited liability businesses:
1. Share capital
2. Bank finance
3. Angel or venture capital investment
4. Peer-to-peer lending or crowdfunding
5. Leasing and trade credit
and the most important source of finance which is retained profit.
