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Limited liability - Definition and Overview |
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Limited liability (LL) means that a shareholder cannot lose more money than the value of their shares if the company they hold shares of runs into debt. This is unlike most other companies (usually firms and partnerships) which owners will be faced with possible unlimited debt of personal assets if their companies go bankrupt.
Simply, limited liability is a safeguard against a shareholder by protecting them from losing more money than the value of their shares. In the event of a bankruptcy, all shareholders would simply lose the value of their stocks, and nothing more.
Without this guard in place, they could possibly spiral into an endless debt.
See also
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