Question

What's limited liability?​

Answer 1

Limited liability is a legal concept that protects the personal assets of individual shareholders or owners of a business from being used to settle the debts and liabilities of the business. In other words, it limits the financial risk faced by the owners of a company in the event of business-related obligations, such as debts, lawsuits, or other financial liabilities.

When a business operates under limited liability, the owners' personal assets, such as their homes, cars, and bank accounts, are generally shielded from being seized to cover business debts or legal claims. Their liability is limited to the amount they have invested in the company or the value of their shares.

Limited liability is a significant advantage for business owners, particularly in the context of corporations and limited liability companies (LLCs). It encourages entrepreneurship and investment because it provides a level of protection for individuals who invest in or own businesses, reducing their personal financial risk in case of business failure or financial troubles. However, it's essential to note that limited liability does not protect against illegal or fraudulent activities, and there are situations where personal liability can still apply, such as in cases of personal guarantees or gross negligence.

Step-by-step explanation:

Answer 2

In business, limited liability refers to the legal concept that essentially protects the owner’s or shareholder’s personal assets from being used for properties of the business.

In a business with limited liability, the company owners only can use what they invested in the business, and their personal assets are insured from use of the business. This means in case the business comes across financial difficulties, no personal funds are allowed to be used.