Sole traders and partnerships have unlimited liability. This means that if the business runs up large debts and is unable to pay them, the owners will have to pay the money back out of their own pocket, e.g., sole traders and partners have to use their own money and may even have to sell possessions such as their cars and homes to pay off the debts of their business. The owners' liability (responsibility) for debts is unlimited.
Limited companies have limited liability. This means the owners of the company (known as shareholders) can only lose the amount that they have risked should it go bankrupt, e.g., if a Limited Company goes bankrupt, the shareholders will only lose the money that they used to buy the shares.