Unlimited vs Limited Liability
Business: Edexcel IGCSE, topic 1.2.4
Unlimited vs Limited Liability
Businesses with unlimited liability (sole traders and partnerships) are much easier to set up because you don’t need to incorporate. The process of incorporating can be expensive and time consuming.
Can change legal structure
- As businesses grow, their legal structure often changes. This is because businesses often need more capital (money) to grow.
- Most private limited companies become public limited companies because selling the shares on the stock exchange allows them to raise finance to fund their company’s expansion.
Access to finance
- It is normally easier for limited companies to get bank loans than sole traders or partnerships.
- This will help them raise more capital to grow. Because of this, sole traders and partnerships often decide to incorporate the business.
Test yourself on Unlimited vs Limited Liability
Why do most private limited companies become public limited companies?
Why do most companies try to become incorporated?