A corporation is said to have limited liability. What does limited liability mean?

Question

Quizplus · Accepted Answer

Limited liability means that investors are not personally responsible for the debts or legal liabilities of the corporation. If the corporation goes bankrupt or is sued, the investors are only liable up to the amount of their investment. Personal assets of the investors are protected. Option A is incorrect because it implies that investors have to use their own personal assets to pay off the debts of the corporation. Options C and D are incorrect because they are extreme cases that do not accurately define limited liability.

A Corporation Is Said to Have Limited Liability