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GCSE Business · key term
An owner’s personal responsibility for business debts, which can put their personal possessions at risk.
Used by AQA, Edexcel and OCR
Paper 1, Paper 2
Responsibility for business debts that can extend to an owner’s personal assets.
Revise: Business Legal StructuresSole traders have unlimited liability. If the business cannot pay its debts, the owner’s personal assets may be at risk. This makes the amount of borrowing and the likelihood of failure important considerations.
Specification 1.1.2, 1.4.1 · Paper 1
A legal responsibility in which an owner's personal possessions may be used to pay business debts.
Revise: Risk and RewardWith unlimited liability, personal possessions may also be used to pay those debts. The risk can therefore extend beyond the money originally invested in the business.
Owners are personally responsible for business debts, so their personal assets may be used to repay debts the business cannot pay.
Paper 1
A situation in which a business owner is personally responsible for all the business’s debts, potentially putting personal possessions at risk.
Revise: Risk and RewardIf a business has unlimited liability, its owner is personally responsible for its debts and may have to sell personal possessions to repay them.
Financial responsibility for all business debts, which may require an owner to use personal assets to repay them.
Legal responsibility for business debts that can put an owner’s personal possessions at risk.
For a question about unlimited liability, explain that personal assets may be used to repay business debts, then develop the consequence for the owner.
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