What is Unlimited Liability?

In the moment in wich a person becomes a business owner (acording to the type of enterprise or under especific circunstances) acquires an unlimited liability, this person will assume for all business debts without any restrictions.

If the company went bankrupt and still has debts, therefore business owners or partners with this kind of liability will have to account for the remaining obligations of money with their personal wealth. In other words, the creditors will be able to strip the partners of their goods such as money saved in the back.

And, if this ins't enough to pay the debts then the next step is the auction off goods such as cars or even houses and later its sale in order to cover the balance owed.

This kind or responsabilty, also called unlimited company, has to be avoided at any cost when starting a company. In some extreme cases, if the debt is so big for the partners to pay for it in the rest of their lives, the debt passes to their sons.

As you can see, the last thing we want to see is our sons paying our debts so one of the first advises to keep in mind when becoming a business owner is not to acquire an unlimited liability for any reason.