IGCSE/GCSE/O & A Level/IB/University Student Forum

Qualification => Subject Doubts => IGCSE/ GCSE => Commerce => Topic started by: SauD~ on March 08, 2011, 01:36:15 pm

Title: Stoopid Business Help!
Post by: SauD~ on March 08, 2011, 01:36:15 pm
Can anyone help me in business?
i just don't really understand the "limited liability"
The definition of Limited liability is:
                                             In case of insolvency or loses, the amount of debt will not exceed the actual amount of investment in the business by the shareholder.

can anyone explain it to me? :-\  and Does the owners get the limited limitably advantages? how?

Thanks 
Title: Re: Stoopid Business Help!
Post by: elemis on March 08, 2011, 01:40:44 pm
With regards to unlimited liability : If a business has debts that it cannot pay then its creditors by law can cease the firm's assets AND the owner's assets to pay off the debt.

In the case of LIMITED LIABILITY, the owner's liability to pay off any outstanding debts is limited to money invested into the business.

The creditors CANNOT cease the owner's personal assets.
Title: Re: Stoopid Business Help!
Post by: SauD~ on March 08, 2011, 01:43:16 pm
Quote from: Ari Ben Canaan on March 08, 2011, 01:40:44 pm
With regards to unlimited liability : If a business has debts that it cannot pay then its creditors by law can cease the firm's assets AND the owner's assets to pay off the debt.

In the case of LIMITED LIABILITY, the owner's liability to pay off any outstanding debts is limited to money invested into the business.

The creditors CANNOT cease the owner's personal assets.
Thanks :)
so they do have to pay later, right?
Title: Re: Stoopid Business Help!
Post by: $tyli$h Executive on March 08, 2011, 02:12:33 pm
^ As Ari said.

so they do have to pay later, right?

No. Whatever they have to pay cannot exceed the firm's assets.
Title: Re: Stoopid Business Help!
Post by: SauD~ on March 08, 2011, 02:18:55 pm
Quote from: $tyli$h Executive on March 08, 2011, 02:12:33 pm
^ As Ari said.

so they do have to pay later, right?

No. Whatever they have to pay cannot exceed the firm's assets.
hmm, the left amount will never be paid to suppliers?
even, if they made lots of profits ???
Title: Re: Stoopid Business Help!
Post by: $tyli$h Executive on March 08, 2011, 03:09:55 pm
Quote from: $~SauD~$ on March 08, 2011, 02:18:55 pm
hmm, the left amount will never be paid to suppliers?
even, if they made lots of profits ???

It will be paid back. If such a situation arises, the creditors will take over the business (bankruptcy court will be an intermediate step). If its a public limited company, new bonds/securities would be issued to investors by the creditors, whose money will be used to cover the debt.

If its not, the creditors can take over the business themselves, sell its assets, or sell the debts to new investors.
Title: Re: Stoopid Business Help!
Post by: Most UniQue™ on April 08, 2011, 08:31:04 pm
limited liability is that the owners of the company,the shareholders, will not be held responsible for any debts owing,their liability is limited to the amount invested in the business