Final answer:
Shareholders in a corporation have limited liability, meaning they are only responsible for the company's debts up to the amount they invested. This encourages investment and makes it easier for corporations to raise funds for growth without risking shareholders' personal assets.
Step-by-step explanation:
When we say a corporation's shareholders have limited liability, it means that the shareholders' responsibility for the company's debts and obligations is limited to the amount of money they invested in the corporation. This is a crucial feature of the corporate business structure because it protects shareholders' personal assets from being used to pay for company debts, meaning they can't lose more than they invested. This aspect of limited liability makes investing in corporations less risky and more appealing, thus making it easier for these businesses to raise capital through the sale of stock or issuing bonds. The ability to sell stock to finance company growth or to borrow money for expansion and other business purposes without putting shareholders at personal financial risk fosters business development and economic growth.