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Unlimited liability

Unlimited liability means owners can be personally responsible for business obligations beyond their investment, subject to applicable law. Unlike a shareholder with limited liability, an owner with unlimited liability may have to use personal assets if business assets do not cover obligations. Consider the business's legal form before concluding who is liable; some partnership arrangements limit particular partners' exposure. A personal guarantee can create an additional obligation even where an owner otherwise has limited liability.

Worked example

A sole trader may need personal assets to settle business debts.

Common mistake

The extent of a partner's liability depends on the partnership form and jurisdiction.

Where it appears in your exams

QualificationExamRelationshipPeriod
ACCA F1 Supporting July 2027–August 2028
ACCA FA Direct September 2026–June 2027
ACCA K1 Direct July 2027–August 2028
CIMA BA4 Direct Official assessment-window verification pending
FIA FFA Direct September 2026–June 2027

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