A business is generally an act of selling goods and services with an aim of making a profit and earning a living. The premises where these activities are carried out is also known as the business. The main types of businesses are; sole proprietorship, partnership, company, corporation and cooperative. Businesses can also be classified as limited liability businesses and unlimited liability businesses. Liability is the act of being responsible. In unlimited liability businesses, the owners are liable therefore answerable in law in case of misconducts while in the limited liability businesses, the owners are not liable for any losses or misconduct. The following are ways in which a business owner can lose the unlimited liability.
First, a business owner can lose the unlimited liability in case of fraud. In case the owner of the business exaggerates the value of commodities or misrepresents information with an aim of gaining money, he/she should be fully liable. This activity is against the law and it disregards the duties and responsibilities of the business owner. Another common fraud activity is exaggerating the value of the assets in order to get higher in order to get a higher compensation from the insurance company. You can learn more about business liability insurance or for more information, visit https://zaneslaw.com/phoenix/dog-bite-attorney/.
Second, a business owner may lose unlimited liability in case he/she is involved in a criminal action. In case the business owner assaults a client or any other type of misconduct, the business owner will be fully liable for his/her actions.
Misuse of funds is the third act that will make a business owner to lose the limited liability. In case the owner of the business scopes some amount of money for his/her personal use, he/she will be fully liable. The misuse of funds may also arise in case the business owner has one bank account which he/she uses for keeping the personal funds and the business funds. A business owner is supposed to have two separate bank accounts, one for the personal funds and the other for the business and he/she should perform proper accounting.
Lastly, a business owner may lose the limited liability in case he/she borrows a business loan without involving the other owners. Before a limited liability business borrows a loan, all the owners are supposed to be consulted. In case a business owner borrows a business loan without consulting the others, his/her assets are supposed to be taken by the lender in case the business defaults payment. A business owner should not personally put a sign on a contract but instead, all the owners are supposed to sign. You can read more on this here: https://www.huffingtonpost.com/nellie-akalp/what-small-business-owner_2_b_7166086.html.