Practice question · Multiple choice
Two friends start a company and choose an SL over a partnership even though the paperwork is heavier. What are they buying?
Hints
- Ask what happens to each founder's house if the business fails owing money.
- The paperwork creates something that did not exist before. What is it?
Show the answer
B. A legal wall between company debts and personal assets
Why
Incorporation invents a second person who owns the debts, so the founders risk what they put in and no more. Option 4 confuses the wall's two sides, the company still pays from its own funds until they run out. That bounded downside is what makes outside investment thinkable at all.
Practise Business Types
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