IGCSE/ A-Level Revision Questions

The table below summarises the main pros and cons of unlimited liability for partners:

Advantages

Disadvantages

Greater credibility with lenders and suppliers, as personal assets back the business.

Potential for higher profit retention, since profits are not shared with external shareholders.

Flexibility in management decisions without corporate formalities.

Personal assets are at risk if the business incurs losses or legal claims.

Difficulty attracting external investors who fear unlimited exposure.

Higher stress and financial insecurity for partners.

In high‑risk industries (e.g., oil exploration, biotechnology), the potential for large liabilities makes unlimited liability unattractive. A limited liability structure such as a private limited company is generally more suitable, as it protects owners’ personal wealth while still allowing the business to raise capital.

Business – 1.2 Business structure – Business ownership | e-Consult

1.2 Business structure – Business ownership (1 questions)