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
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| 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 |
