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What do you understand by the term unlimited liability?
- a)The personal assets of owner can be sold when the assets of the business are not enough to
- b)The personal assets of owner cannot be sold at all.
- c)The personal assets of owner can be sold, according to the wish of the creditors
- d)The personal assets of owner can be sold, only to a limited extent.
Correct answer is option 'A'. Can you explain this answer?
Most Upvoted Answer
What do you understand by the term unlimited liability?a)The personal ...
Unlimited liability refers to a legal concept in which the owner or partners of a business are personally liable for all the debts and obligations of the business. This means that if the business fails to meet its financial obligations, the personal assets of the owner can be sold to cover the outstanding debts.
Explanation:
1. Personal assets can be sold to cover business debts:
Unlimited liability means that the personal assets of the owner can be sold when the assets of the business are not enough to cover its debts. In other words, if the business fails and is unable to pay its creditors, the owner's personal assets such as their house, car, savings, and investments can be seized and sold to repay the outstanding debts.
2. Personal assets are used to satisfy business obligations:
In the case of unlimited liability, the owner's personal assets become liable for the debts and obligations of the business. This is different from limited liability, where the owner's personal assets are protected, and only the assets of the business are at risk.
3. Protection of creditors' interests:
The concept of unlimited liability ensures that creditors have a higher level of security when lending money or extending credit to a business. It provides them with the assurance that if the business fails to repay its debts, they can pursue the owner's personal assets to recover their money. This reduces the risk for creditors and can make it easier for businesses to secure loans or credit.
4. Impact on the owner's financial well-being:
Unlimited liability can have significant implications for the owner's personal financial well-being. If the business accumulates substantial debt and fails, the owner may lose their personal assets, leading to financial ruin. This risk can discourage individuals from starting or expanding businesses, particularly in industries with high levels of uncertainty or risk.
Conclusion:
In summary, unlimited liability means that the personal assets of the owner can be sold when the assets of the business are not enough to cover its debts. This concept provides a higher level of security for creditors but also exposes the owner to significant personal financial risk. It is important for entrepreneurs to understand the implications of unlimited liability when considering different business structures and risk management strategies.
Explanation:
1. Personal assets can be sold to cover business debts:
Unlimited liability means that the personal assets of the owner can be sold when the assets of the business are not enough to cover its debts. In other words, if the business fails and is unable to pay its creditors, the owner's personal assets such as their house, car, savings, and investments can be seized and sold to repay the outstanding debts.
2. Personal assets are used to satisfy business obligations:
In the case of unlimited liability, the owner's personal assets become liable for the debts and obligations of the business. This is different from limited liability, where the owner's personal assets are protected, and only the assets of the business are at risk.
3. Protection of creditors' interests:
The concept of unlimited liability ensures that creditors have a higher level of security when lending money or extending credit to a business. It provides them with the assurance that if the business fails to repay its debts, they can pursue the owner's personal assets to recover their money. This reduces the risk for creditors and can make it easier for businesses to secure loans or credit.
4. Impact on the owner's financial well-being:
Unlimited liability can have significant implications for the owner's personal financial well-being. If the business accumulates substantial debt and fails, the owner may lose their personal assets, leading to financial ruin. This risk can discourage individuals from starting or expanding businesses, particularly in industries with high levels of uncertainty or risk.
Conclusion:
In summary, unlimited liability means that the personal assets of the owner can be sold when the assets of the business are not enough to cover its debts. This concept provides a higher level of security for creditors but also exposes the owner to significant personal financial risk. It is important for entrepreneurs to understand the implications of unlimited liability when considering different business structures and risk management strategies.
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What do you understand by the term unlimited liability?a)The personal ...
Liability is the duty of the proprietor to clear off the outsider debts. Unlimited liability means the proprietor should clear off the entire debts. For that even his personal assets can be sold if the business assets is not sufficient.
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What do you understand by the term unlimited liability?a)The personal assets of owner can be sold when the assets of the business are not enough tob)The personal assets of owner cannot be sold at all.c)The personal assets of owner can be sold, according to the wish of the creditorsd)The personal assets of owner can be sold, only to a limited extent.Correct answer is option 'A'. Can you explain this answer? for Commerce 2025 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about What do you understand by the term unlimited liability?a)The personal assets of owner can be sold when the assets of the business are not enough tob)The personal assets of owner cannot be sold at all.c)The personal assets of owner can be sold, according to the wish of the creditorsd)The personal assets of owner can be sold, only to a limited extent.Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for Commerce 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for What do you understand by the term unlimited liability?a)The personal assets of owner can be sold when the assets of the business are not enough tob)The personal assets of owner cannot be sold at all.c)The personal assets of owner can be sold, according to the wish of the creditorsd)The personal assets of owner can be sold, only to a limited extent.Correct answer is option 'A'. Can you explain this answer?.
What do you understand by the term unlimited liability?a)The personal assets of owner can be sold when the assets of the business are not enough tob)The personal assets of owner cannot be sold at all.c)The personal assets of owner can be sold, according to the wish of the creditorsd)The personal assets of owner can be sold, only to a limited extent.Correct answer is option 'A'. Can you explain this answer? for Commerce 2025 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about What do you understand by the term unlimited liability?a)The personal assets of owner can be sold when the assets of the business are not enough tob)The personal assets of owner cannot be sold at all.c)The personal assets of owner can be sold, according to the wish of the creditorsd)The personal assets of owner can be sold, only to a limited extent.Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for Commerce 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for What do you understand by the term unlimited liability?a)The personal assets of owner can be sold when the assets of the business are not enough tob)The personal assets of owner cannot be sold at all.c)The personal assets of owner can be sold, according to the wish of the creditorsd)The personal assets of owner can be sold, only to a limited extent.Correct answer is option 'A'. Can you explain this answer?.
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