What is the liability of the business owners who are personally responsible for its debts?

• A. Double liability
• B. Limited Liability
• C. Shared liability
• D. Unlimited Liability

Answer: (D)

Liability here is about whether owners must cover business debts with their own money. When owners are personally responsible for the debts, it means unlimited liability—the business and the owner are legally one and same in terms of debt. This happens with sole traders and traditional partnerships, so if the business can’t pay, creditors can claim the owners’ personal assets as well as business assets. The alternative of limited liability would mean personal assets are protected and only the business assets (up to what’s invested) can be at risk, which isn’t the situation described. “Double liability” or “shared liability” aren’t standard terms for this concept, so they don’t fit.