limited liability

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Limited liability

Limitation of loss to what has already been invested.

Limited Liability

A situation in which a partner is not liable for more than his/her/its investment in case of insolvency. That is, limited liability means that the relevant partner would lose the value of his/her investment if the company declares bankruptcy, but would not be held liable for other outstanding debts. A limited liability company, where all partners and owners have limited liability, is one of the most common corporate structures in the United States. It is designated by the letters "LLC" after its name.

limited liability

The liability of a firm's owners for no more capital than they have invested in the business. Essentially, the legal separation of ownership and liability means that a stockholder can lose no more than he or she has paid for the shares of ownership regardless of the firm's financial obligations. Limited liability is one of the major advantages of organizing a business as a corporation. Compare unlimited liability.

limited liability

an arrangement that limits the maximum LOSS which a sHAREHOLDER is liable for in the event of company failure to the SHARE CAPITAL which he originally subscribed.

The principle of limited liability limits a shareholder's maximum loss in the event of his company failing to the original share capital which he invested, no further claims by creditors against the shareholder's other assets being permitted. Once shareholders were protected in this way many more people were encouraged to invest in companies and JOINT-STOCK COMPANIES grew rapidly. To warn potential creditors that any claims by creditors will be limited in total to the amount of the company's share capital, such companies carry the term: ‘Limited’ (Ltd) or ‘Public Limited Company’ (Plc) after their names.

When a business is subject to unlimited liability, as is the case with SOLE PROPRIETORS and unlimited PARTNERSHIPS, the owners of the business are liable in full for the debts of the business if it fails. This may involve their losing not only the capital that they have put into the business, but also most of their personal assets.

When the directors of a joint-stock company continue trading after they should have known the company was insolvent (see INSOLVENCY), they can lose the protection of limited liability and become personally responsible for the firm's debts.

limited liability

a liability that limits the maximum LOSS that a SHAREHOLDER is liable for in the event of company failure to the SHARE CAPITAL that he or she originally subscribed.

The principle of limited liability limits a shareholder's maximum loss in the event of a company failing to the original share capital that he or she invested, no further claims by creditors against the shareholder's other assets being permitted. In protecting shareholders in this way, many more people were encouraged to invest in companies, and JOINT-STOCK COMPANIES grew rapidly To warn potential creditors that any claims by creditors will be limited in total to the amount of the company's share capital, such companies carry the term ‘Limited’ (Ltd) or ‘Public Limited Company’ (plc) after their names.

When a business is subject to unlimited liability, as is the case with sole proprietors, unlimited partnerships and unlimited companies, then the owners of the business are liable in full for the debts of the business if it fails. This may involve them losing not only the capital that they have put into the business but also most of their personal assets.

References in periodicals archive ?
Work at SED has already commenced under a $10 million Limit of Liability from SEI while formal contract details are finalized.
Besides having the ability to package coverages under one policy, insurance companies can opt for one limit of liability rather than separate liability limits.
The E-RiskEdge - Select Community Bank Program provides a higher limit of liability than the original program.
com are underwritten by Zurich North America and have a $25 million limit of liability.
5 million or 200% of the UK Financial Services Authority's required minimum margin of solvency; (2) through a quota share reinsurance treaty, XLCA-UK will cede 97% of its net exposure to XLCA; and, (3) XLCA will assume 100% of net incurred losses in excess of 10% of XLCA-UK's capital and surplus, subject to a $50 million limit of liability.
Although PTNA's capital adequacy improved significantly as a result of the agreement, the agreement includes an aggregate limit of liability that is a function of certain factors and that may be reduced in the event that the subsidiaries do not obtain rate increases as the agreement may require.