Which type of business organization has unlimited liability, meaning the owner's personal assets may be used to settle business debts?
Question 1 Report
Which type of business organization has unlimited liability, meaning the owner's personal assets may be used to settle business debts?
Answer Details
The correct answer is Sole trader.
A sole trader has unlimited liability, which means there is no legal distinction between the owner and the business. If the business cannot pay its debts, the owner's personal assets (such as their home or car) may be seized to settle business debts.
Public limited companies and private limited companies have limited liability, meaning shareholders can only lose the amount they have invested. A cooperative society is a separate legal entity, so members generally have limited liability.
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