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.
