Limited Liability: Definition, Meaning, Pros & Cons

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Accounting
Actuarial Science in Business
Business Case Studies
Business Data Analytics
Business Development
Business Operations
Change Management
Corporate Finance
Family Business
Financial Performance
Human Resources
Influences On Business
Intermediate Accounting
International Business
Introduction to Business
Managerial Economics
Managers
Nature of Business

Business Aims and Objectives
Cost
External Environment
Forms of Business
Franchising
Key Business Terms
Limited Liability
Non-Profit
Revenue
Shareholder
Sole Trader

Operational Management
Organizational Behavior
Organizational Communication
Project Planning & Management
Sales in Business
Startups
Strategic Analysis
Strategic Direction

Contents

Accounting
Actuarial Science in Business
Business Case Studies
Business Data Analytics
Business Development
Business Operations
Change Management
Corporate Finance
Family Business
Financial Performance
Human Resources
Influences On Business
Intermediate Accounting
International Business
Introduction to Business
Managerial Economics
Managers
Nature of Business

Business Aims and Objectives
Cost
External Environment
Forms of Business
Franchising
Key Business Terms
Limited Liability
Non-Profit
Revenue
Shareholder
Sole Trader

Operational Management
Organizational Behavior
Organizational Communication
Project Planning & Management
Sales in Business
Startups
Strategic Analysis
Strategic Direction

Contents

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Flashcards in Limited Liability 15

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Why do companies have limited liability?

Because owners do not want to be taxed.
Because they do not want to pay dividends.
Because they do not want to be incorporated.
Because owners do not want to be personally liable for losses.

A difference between a limited liability company and a sole proprietorship is that:

A limited liability company can own property and a sole proprietorship cannot

The difference between a private limited company and a public limited company is that:

Private limited companies can decide who they sell shares to but public limited companies cannot

What type of company would be at risk of a takeover?

Private limited company
Public limited company
Sole proprietorship
Partnership

One of the disadvantages of a limited liability company is that:

There are restrictions on the number of owners.
There are restrictions on the number of shares you can sell.
The owners are personally liable for the debts of the company.
The company is potentially at risk of takeovers.

Limited liability means the company has to take full responsibility for its own financial losses and debts.

True

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Frequently Asked Questions about Limited Liability

what is limited liability?

Limited liability means that the company is a separate legal entity from its owner or owners. The company as an 'individual' can own assets, equipment, or offices, and is responsible for its own financial losses and debts.

What is a limited liability company?

Many businesses choose to operate as private limited companies. Unlike sole proprietorships or partnerships, a limited company is its own separate legal entity. This means that the owners or shareholders are not personally liable for the losses of the company. A private limited company can be owned by an individual, a group of individuals, or another corporate entity (another company).

What is a limited liability in business?

Do partnerships have limited liability?

Partnerships do not have limited liability. Partners own full responsibility for either gains or losses of the company.

Why do companies have limited liability?

Limited liability is important for companies, as it helps them raise money. With limited liability, investors only risk losing the money they have invested in shares. As a result, shareholders are more likely to invest in a company if they know they will not lose their personal assets.

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Test your knowledge with multiple choice flashcards

Why do companies have limited liability?Because owners do not want to be taxed. Because they do not want to pay dividends. Because they do not want to be incorporated. Because owners do not want to be personally liable for losses.

A. A. B. D. C. B. D. C.

A difference between a limited liability company and a sole proprietorship is that:

A. A limited company can sell its shares freely whereas a sole proprietor can only sell half of its shares. B. A limited liability company is not a separate legal entity from its owners but a sole proprietor is a separate legal entity from its owner. C. A limited liability company can own property and a sole proprietorship cannot D. A private limited company can only be owned by one person and a sole proprietorship can be owned by multiple owners.

The difference between a private limited company and a public limited company is that:

A. A private company is owned by one person, and a public company is owned by more than one person B. Private limited companies can advertise their shares in the media but public limited companies cannot C. Private companies have unlimited liability and public companies have limited liability D. Private limited companies can decide who they sell shares to but public limited companies cannot

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