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Unlimited Liability

August 28, 2019

Different types of businesses and business interests hold different levels of liability when it comes to debts and obligations. Owners of sole proprietorship businesses and general partnerships may be subject to unlimited liability, meaning they hold responsibility for all, or a certain percentage of, debts and obligations of their businesses

Unlimited liability refers to the legal obligations of general partners and sole proprietors because they are liable for all business debts if the business can’t pay its liabilities. In other words, general partners and sole proprietors are responsible for paying off all of the company debts personally if the company can’t make its payments. 
This could be exposed to losses that result from company debts. In this situation, the business owner can be held personally responsible for paying back business debts if the business were to run out of money. This can include the accumulations from debt made by the business or if the company were to lose a lawsuit and be forced to pay more damages than it can afford. Therefore, business owners would be required to cover the debt.

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