What is the primary difference in regard to the legal liability of the owners? Explain with...

What is the primary difference in regard to the legal liability of the owners? Explain with examples.

Expert Solution

Legal liability indicates liability in connection to debts – suppose the debt obligation is not met then the owner should be held responsible. The primary difference of legal liability is unlimited legal liability and limited legal liability.

Unlimited legal liability: this is the form of liability in which the ownership liability is not restricted to any limit --- if required personal property of the owner could also be taken by the court. Examples are proprietorship and partnership types of businesses where owners and partners respectively have unlimited liability.

Limited legal liability: In this case ownership liability is restricted up to the investments made by the owners in the business. Therefore, there is no danger of losing of personal property. The form of business like corporation has limited legal liability – shareholders are owners here and their liability is up to the investments in shares of the corporation.

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