Unlimited liability means that the owner is responsible for all business debts. That means a higher risk for them. That contrasts with the limited liability where the legal identity of the business is separate from the owner.
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Examples of unlimited liability
Two examples of liability business organization organizations are sole trader and partnership. Legally, there is no difference between the person who runs the business and the business itself. That means, when a company owes and is unable to pay, the owner must use their personal funds to pay off these debts.
The owner may have to sell assets or property to pay off debt. They can become bankrupt personally.
