Limited Liability

Posted in Finance, Accounting and Economics Terms, Total Reads: 1072

Definition: Limited Liability

While making investments, investors often fear about the amount of liability that they would have to incur, in case of a company goes bankrupt. Limited liability is a kind of liability under which the person liability is only limited to the amount invested by him in the partnership or limited liability company irrespective to the amount of losses a company could incur in case of bankruptcy.

However the shareholder can participate in the growth of the company.

For example in case of the bankruptcy of Lehman Brothers, the company had billions of debt to be repaid. The shareholders were however only responsible to the amount of investment that they had made.

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