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JAMB Economics 1998 Question 21

Question 21

Business Organisations

Liquidation of limited liability company implies that the

  1. A.company may not pay its debts
  2. B.debts of the company can only be paid from its own assets
  3. C.debts of the company are paid from both business and private funds of the owners
  4. D.debts of the company must be paid from public funds only.
Show the answer and explanation

Answer: B (debts of the company can only be paid from its own assets)

Explanation

With limited liability, shareholders' private property is safe; the company's debts are paid only from the company's own assets.