What is limited liability?
In GCSE Business, limited liability is where a company’s owners are only responsible for business debts up to the value of their financial investment in that business. This is because the business and its owners are considered separate legal entities.
Should a company run into financial difficulties, its owners (known as shareholders) are not required to use their own assets to pay debts. If a company ceases trading, its owners’ shares no longer have any value, so their investment is lost.
Limited liability also guarantees that shareholders are not held responsible for unlawful acts committed by management or employees of the company.
Limited Liability Revision Resources to Ace Your Exams
Save My Exams has a great range of resources to explore the topic of limited liability further.
Read our GCSE Business liability revision notes or test your knowledge of business ownership, including limited liability, with our exam questions to improve your grades.
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