Limited liability means

• A. The business is legally separate from the owner
• B. The owner is personally responsible for all debts
• C. The government guarantees debts
• D. The business and owner are the same entity

Answer: (A)

Limited liability means the business is treated as a separate legal entity from its owner. This separation lets the company incur debts and be sued in its own name, so only the business’s assets are at risk in ordinary cases. The owner’s personal assets are generally protected from the business’s debts, which is why this structure is favored for larger ventures. This protection isn’t present in sole traders or general partnerships, where owners can be personally liable. The government does not guarantee debts; the protection comes from the business’s legal status.