Theme 2: Limited Liability

Limited liability

The concept where the liability of a company’s shareholders is limited to the value of their investment in the share capital of the company, protecting their personal assets.

Separate legal identity

The legal distinction between a company and its shareholders, allowing shareholders to be shielded from the company's liabilities.

Shareholder

An individual or institution that owns a percentage of a company, benefiting from dividends and potential increases in the share price.

Unincorporated business

A business structure like a sole trader or partnership where the owner has unlimited liability for the business debts, risking personal assets.

Sources of finance for limited liability businesses

Share capital, retained profit, venture capital, business angels, bank loans.

Sources of finance for unlimited liability businesses

Personal savings, retained profit, mortgages, unsecured bank loans, peer-to-peer lending, crowdfunding, grants, bank overdrafts.