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GCSE Business · key term
Protection that limits shareholders’ financial liability for company debts to their investment. Their personal assets are separate from the company’s assets.
Used by AQA, Edexcel and OCR
Paper 1, Paper 2
Protection that limits shareholders’ financial responsibility for company debts to their investment in its shares.
Revise: Business Legal StructuresBoth private and public limited companies give shareholders limited liability. Shareholders can lose the money invested in their shares, but company debts do not normally put their personal possessions at risk merely because they own shares. The company remains responsible for paying its debts.
Specification 1.4.1, 2.1.1 · Paper 1, Paper 2
Limited liability protects shareholders’ personal assets; it does not mean that the company has no debts or that shareholders cannot lose their investment.
Limited liability protects shareholders’ personal assets from company debts; it does not prevent them losing their investment or guarantee business success.
Limited liability protects shareholders’ personal finances; it does not mean that the company cannot fail.
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Owners’ financial liability for business debts is limited to the amount they have invested or agreed to invest. Their personal assets are normally protected.
With limited liability, owners’ financial liability is limited to the amount they have invested or agreed to invest. A private limited company is incorporated, meaning that the company has a legal identity separate from its shareholders. The company owes its debts; shareholders’ personal assets are normally protected.
Protection that limits a shareholder’s financial loss to the amount invested in the company, rather than making them personally responsible for its debts.
Paper 1
Legal protection that normally limits a shareholder’s loss to their investment in the company, rather than making them personally responsible for its debts.
Revise: Types of Business OwnershipBoth private and public limited companies give shareholders limited liability. Shareholders can lose their investment, but they are not normally personally responsible for the company’s debts.
Protection that limits shareholders’ responsibility for company debts to their investment; their personal possessions are not normally at risk.