Explain one disadvantage of a sole trader having unlimited liability

Unlimited liability is when the business and it's owner are viewed as the same legal entity, and therefore any debts that the business runs itself into must be paid for and dealt with by the business owner. This means that the business owner is solely liable for the business' debts and this is a major disadvantage, as this may meant that the business owner can be taken to court and have their own personal belongs seized until the business' debts have been paid for. As a result, unlimited liability for a sole trader comes with a higher level of risk, as the business owner could lose everything in trying to pay off the business' debts.

GA
Answered by Gemma A. Business Studies tutor

10529 Views

See similar Business Studies GCSE tutors

Related Business Studies GCSE answers

All answers ▸

Explain one disadvantage of using on overdraft as a source of finance for a small business? Provide 2 alternative sources of finance


Describe two potential pricing strategies that a firm may adopt when entering a new market (4)


What is unincorporated business?


Explain how a business can use outsourcing. (2 marks)


We're here to help

contact us iconContact ustelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

MyTutor is part of the IXL family of brands:

© 2026 by IXL Learning