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What is an unlimited liability company?

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Quick Answer

An unlimited liability company is a company that is considered incorporated, but all profits and losses flow to its shareholders. A shareholder is protected from liability in regards to the company's debts, with the exception of the company becoming liquidated.

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Full Answer

If a shareholder sells their shares within one year of the company's liquidation, they can then become liable for any debts that the company has to repay. There is no cap in an unlimited liability company and the amount that a shareholder has invested is typically not considered. An unlimited liability company is an option for both sole proprietorships and general partnerships.

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