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In the case of a company with unlimited liability, what is the extent of a member's liability?
- a)Limited to the amount of their share capital
- b)Limited to the amount they undertook to contribute in the event of winding up
- c)Unlimited
- d)Limited to the nominal value of shares they hold
Correct answer is option 'C'. Can you explain this answer?
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In the case of a company with unlimited liability, what is the extent ...
In a company with unlimited liability, every member is liable in full for all debts contracted by the company during the period they were a member.
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In the case of a company with unlimited liability, what is the extent ...
Understanding Unlimited Liability
In a company with unlimited liability, members or shareholders have a different level of financial responsibility compared to those in limited liability companies. Here’s a detailed explanation:
What is Unlimited Liability?
- Unlimited liability means that the members of the company are personally responsible for the debts and obligations of the company without any limit.
- This means that if the company faces financial difficulties, creditors can pursue the personal assets of the members to settle the company's debts.
Extent of Liability
- In the case of unlimited liability, the extent of a member’s liability is not confined to the amount they have invested or the nominal value of their shares.
- Thus, if the company goes bankrupt or is wound up, members are liable to contribute any amount necessary to ensure that the company can meet its debts.
Key Implications
- Members can lose personal assets: This could include their savings, property, and other personal possessions.
- Risk assessment: Individuals considering joining such a company must assess their risk tolerance as the financial consequences can be severe.
Conclusion
- The correct answer is option 'C' - Unlimited. Members of a company with unlimited liability face the potential for personal financial loss beyond their investment in the company, highlighting the significant risks involved in such business structures.
In a company with unlimited liability, members or shareholders have a different level of financial responsibility compared to those in limited liability companies. Here’s a detailed explanation:
What is Unlimited Liability?
- Unlimited liability means that the members of the company are personally responsible for the debts and obligations of the company without any limit.
- This means that if the company faces financial difficulties, creditors can pursue the personal assets of the members to settle the company's debts.
Extent of Liability
- In the case of unlimited liability, the extent of a member’s liability is not confined to the amount they have invested or the nominal value of their shares.
- Thus, if the company goes bankrupt or is wound up, members are liable to contribute any amount necessary to ensure that the company can meet its debts.
Key Implications
- Members can lose personal assets: This could include their savings, property, and other personal possessions.
- Risk assessment: Individuals considering joining such a company must assess their risk tolerance as the financial consequences can be severe.
Conclusion
- The correct answer is option 'C' - Unlimited. Members of a company with unlimited liability face the potential for personal financial loss beyond their investment in the company, highlighting the significant risks involved in such business structures.
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In the case of a company with unlimited liability, what is the extent of a member's liability?a)Limited to the amount of their share capitalb)Limited to the amount they undertook to contribute in the event of winding upc)Unlimitedd)Limited to the nominal value of shares they holdCorrect answer is option 'C'. Can you explain this answer?
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In the case of a company with unlimited liability, what is the extent of a member's liability?a)Limited to the amount of their share capitalb)Limited to the amount they undertook to contribute in the event of winding upc)Unlimitedd)Limited to the nominal value of shares they holdCorrect answer is option 'C'. Can you explain this answer? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about In the case of a company with unlimited liability, what is the extent of a member's liability?a)Limited to the amount of their share capitalb)Limited to the amount they undertook to contribute in the event of winding upc)Unlimitedd)Limited to the nominal value of shares they holdCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for In the case of a company with unlimited liability, what is the extent of a member's liability?a)Limited to the amount of their share capitalb)Limited to the amount they undertook to contribute in the event of winding upc)Unlimitedd)Limited to the nominal value of shares they holdCorrect answer is option 'C'. Can you explain this answer?.
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