The short version: Unlimited liability means you’re personally responsible for your business debts. If the business can’t pay what it owes, creditors can come after your personal assets.
Who has unlimited liability?
Sole traders and partners in ordinary partnerships. There’s no legal separation between you and your business. Your savings, your house, your car could all be at risk if things go wrong.
How is limited liability different?
Limited company shareholders typically only risk what they’ve invested in the company. Personal assets are protected (with some exceptions for fraud or personal guarantees).
Should you be worried?
It depends on your business. Low risk service businesses where you’re unlikely to rack up debts might be fine as sole traders. Businesses with significant liabilities, inventory, or potential for things to go wrong might benefit from limited company protection.
Can you change?
Yes. You can incorporate and move from sole trader to limited company if your circumstances change.
Worried about liability in your business? Let’s discuss whether a different structure might suit you better.
