Lesson 1.4.1a
1.4.1a Limited and unlimited liability Quiz: Pearson Edexcel Business, Unit 4
20 questions
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Lesson 1.4.1a, Limited and unlimited liability: 20 multiple choice questions for the Pearson Edexcel GCSE Business (1BS0), Unit 4: Making the business effective, written with Revision Ninja.
Host it live on the board and students join with a game code on their own devices, or revise alone with Free Play. The answers are revealed in the game.
The 20 questions
-
Under unlimited liability, what can happen to an owner's personal possessions if debts mount?
- Protected by law
- Capped at investment
- Seized for debts
- Exempt from claims
-
What financial exposure do owners face under limited liability?
- Total business debts
- Amount invested
- Unlimited personal loss
- Double their stake
-
Which business structure benefits from limited liability?
- Private limited company
- Ordinary partnership
- Sole trader
- Unincorporated firm
-
If a sole trader has £30,000 of business debts, what is the owner's legal responsibility?
- Half the total
- Zero personal liability
- Full debt amount
- Assets value only
-
What is the main benefit of choosing limited liability over unlimited liability?
- Easier borrowing
- Higher profits
- Reduced personal risk
- Lower tax rates
-
A private limited company fails with £50,000 debt. A shareholder invested £20,000. What is their maximum loss?
- £20,000
- £70,000
- £50,000
- £0
-
What type of liability do partners typically face in a standard partnership?
- Unlimited liability
- Shared liability
- Capped liability
- Limited liability
-
What is a major risk of unlimited liability for a sole trader?
- Losing personal home
- Paying corporation tax
- Losing company shares
- Sharing business control
-
Why might a lender ask a small company owner for a personal guarantee?
- To transfer ownership
- To increase dividends
- To avoid corporation tax
- To reduce lender risk
-
What term describes a company treated in law as distinct from its owners?
- Sole proprietorship
- Unlimited liability
- Separate legal entity
- Partnership agreement
-
A shareholder invests £2,000 in a limited company that goes bust. What is the maximum loss?
- £2,000
- £10,000
- Unlimited
- £0
-
Which business type puts the owner's personal assets at risk for business debts?
- Private limited company
- Multiplayer cooperative
- Sole trader
- Public limited company
-
What financial risk is faced by business owners with unlimited liability?
- Maximum £10,000 fine
- Personal wealth at risk
- Fixed dividend cuts
- Loss of company shares
-
Why would a high-risk business prefer to operate as a limited company?
- Avoids all taxation
- Guarantees high sales
- Eliminates business debt
- Protects personal assets
-
What legal principle applies to debts in a traditional business partnership?
- Joint and several
- Fixed share only
- Corporate immunity
- Limited liability status
-
Which of these is NOT a legal feature of limited liability?
- Personal assets at risk
- Shares issued to owners
- Separate legal identity
- Protected personal wealth
-
Why might an owner choose limited liability before taking on a large contract?
- Secures free grants
- Limits personal exposure
- Increases profit margins
- Eliminates competition
-
What is the primary disadvantage of unlimited liability for a business owner?
- Complex auditing rules
- Double taxation
- High incorporation fees
- Personal assets at risk
-
Why can a limited company continue trading after a shareholder dies?
- Government intervention
- Unlimited partner liability
- Separate legal identity
- Automatic bankruptcy protection
-
A sole trader fails owing £14,000. What amount is the owner personally liable for?
- Only £5,000
- A fixed £1,000 fee
- Zero pounds
- The full £14,000
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