eli5 Differences between an Unlimited and Limited Company?
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What happens if the company goes bust?
The maximum that creditors can claim from a limited company is the shares value – the liability is limited to the value of the shares. If creditors are owed more than that, they lose out. In practice the biggest creditors have better lawyers so they get first call on the share value. If there’s nothing left for the smaller creditors, well, that’s capitalism.
If a sole trader goes bust then creditors can claim from anything he owns – company assets, house, car, granny’s vest …
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