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Limited Liability

Why would a business choose to register as a company? Setting up a business as a company has many advantages - including limited liability. To set up your company as a business, you need to register it with a government agency. This process of registering your business as a company is known as incorporation. Now, let's take a look at what this means in more detail.

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  • Immunology
  • Cell Biology
  • Mo

What is incorporation?

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  • Immunology
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What is limited liability?

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  • Immunology
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What is the difference between limited liability and unlimited liability?


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Is it possible to set up a limited liability sole proprietorship?


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What is a dividend?


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Are dividend payments equal to the original investment shareholders made into the firm?


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Why do companies have limited liability?

  1. Because owners do not want to be taxed. 

  2. Because they do not want to pay dividends. 

  3. Because they do not want to be incorporated. 

  4. Because owners do not want to be personally liable for losses. 

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  • Immunology
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  • Mo

A difference between a limited liability company and a sole proprietorship is that: 


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  • Mo

The difference between a private limited company and a public limited company is that:


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What type of company would be at risk of a takeover?

  1. Private limited company 

  2. Public limited company

  3. Sole proprietorship 

  4. Partnership

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  • Immunology
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  • Mo

Imagine you are running a family business. The business is doing really well, so you decide you are going to incorporate your business. What type of company would you set up if you did not want to risk the family business getting into the hands of non-family owners?


Show Answer
  • + Add tag
  • Immunology
  • Cell Biology
  • Mo

What is incorporation?

Show Answer
  • + Add tag
  • Immunology
  • Cell Biology
  • Mo

What is limited liability?

Show Answer
  • + Add tag
  • Immunology
  • Cell Biology
  • Mo

What is the difference between limited liability and unlimited liability?


Show Answer
  • + Add tag
  • Immunology
  • Cell Biology
  • Mo

Is it possible to set up a limited liability sole proprietorship?


Show Answer
  • + Add tag
  • Immunology
  • Cell Biology
  • Mo

What is a dividend?


Show Answer
  • + Add tag
  • Immunology
  • Cell Biology
  • Mo

Are dividend payments equal to the original investment shareholders made into the firm?


Show Answer
  • + Add tag
  • Immunology
  • Cell Biology
  • Mo

Why do companies have limited liability?

  1. Because owners do not want to be taxed. 

  2. Because they do not want to pay dividends. 

  3. Because they do not want to be incorporated. 

  4. Because owners do not want to be personally liable for losses. 

Show Answer
  • + Add tag
  • Immunology
  • Cell Biology
  • Mo

A difference between a limited liability company and a sole proprietorship is that: 


Show Answer
  • + Add tag
  • Immunology
  • Cell Biology
  • Mo

The difference between a private limited company and a public limited company is that:


Show Answer
  • + Add tag
  • Immunology
  • Cell Biology
  • Mo

What type of company would be at risk of a takeover?

  1. Private limited company 

  2. Public limited company

  3. Sole proprietorship 

  4. Partnership

Show Answer
  • + Add tag
  • Immunology
  • Cell Biology
  • Mo

Imagine you are running a family business. The business is doing really well, so you decide you are going to incorporate your business. What type of company would you set up if you did not want to risk the family business getting into the hands of non-family owners?


Show Answer

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Contents
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    Flashcards in Limited Liability 30

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    What is incorporation?

    Incorporation is a process through which a business establishes itself as a company. Through incorporation, the business establishes that it is its own legal entity, separate from its owners and shareholders. It allows the company to benefit from limited liability. 

    What is limited liability?

    Limited liability ensures that the personal assets of the owners and shareholders of a company are safe. If the company were to experience financial troubles, shareholders would only lose up to the amount they originally invested in the company when they bought shares. Limited liability ensures that their personal belongings are kept safe, even if the company is struggling financially.

    What is the difference between limited liability and unlimited liability?


    In limited liability companies, the company is a separate legal entity to its owners. This means that they are not personally responsible for the debts of the company. In an unlimited liability business, the owner is personally responsible for the debts of the business. This means that if the business were experiencing financial difficulties, the personal assets of the owner are at risk.

    Is it possible to set up a limited liability sole proprietorship?


    No, it is not possible to set up a limited liability sole proprietorship. The owner of a sole proprietorship has unlimited liability, meaning that their personal belongings and assets are at risk if the business is experiencing financial difficulties. 

    What is a dividend?


    A dividend is a part of the firm's profits that is paid to its shareholders. The more shares an owner has in the company, the more dividend payments they receive.

    Are dividend payments equal to the original investment shareholders made into the firm?


    No. Dividends are paid based on the profits the company has made. This does not mean that shareholders receive the value of their original investment each time a dividend is paid to them.
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    Frequently Asked Questions about Limited Liability

    what is limited liability? 

    Limited liability means that the company is a separate legal entity from its owner or owners. The company as an 'individual' can own assets, equipment, or offices, and is responsible for its own financial losses and debts.  

    What is a limited liability company? 

    Many businesses choose to operate as private limited companies. Unlike sole proprietorships or partnerships, a limited company is its own separate legal entity. This means that the owners or shareholders are not personally liable for the losses of the company. A private limited company can be owned by an individual, a group of individuals, or another corporate entity (another company). 

    What is a limited liability in business? 

    Many businesses choose to operate as private limited companies. Unlike sole proprietorships or partnerships, a limited company is its own separate legal entity. This means that the owners or shareholders are not personally liable for the losses of the company. 

    Do partnerships have limited liability?

    Partnerships do not have limited liability. Partners own full responsibility for either gains or losses of the company.

    Why do companies have limited liability? 

    Limited liability is important for companies, as it helps them raise money.  With limited liability, investors only risk losing the money they have invested in shares. As a result, shareholders are more likely to invest in a company if they know they will not lose their personal assets. 

    Test your knowledge with multiple choice flashcards

    Why do companies have limited liability?Because owners do not want to be taxed. Because they do not want to pay dividends. Because they do not want to be incorporated. Because owners do not want to be personally liable for losses. 

    A difference between a limited liability company and a sole proprietorship is that: 

    The difference between a private limited company and a public limited company is that:

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