Solution 12.3 

Limited liability means that if the business fails, the only loss the owners incur is the amount that was invested in the business, personal assets cannot be used to pay off debts incurred. 

A company may choose to be an ‘unlimited company’ resulting in its owners being personally liable for the debts and liabilities of the business. A company would choose this option because it allows:

1. The right to reduce issued capital without court permission
2. Exemption from filing accounts (privacy advantage).