limited liability


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Related to limited liability: Share capital, limited partnership, Sole proprietorship, Legal entity, Legal personality

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 ?
at 594 (discussing Canada's adoption of limited liability in 1850).
The constituent meeting is convened which must approve the founder's report of the limited liability company and elect the members of bodies of the company elected by the general meeting of shareholders.
SunDoc Filings provides tips for entrepreneurs forming a Limited Liability Company.
Multi-state issues: If the new LLC will do business outside of New York State, consider whether its status will be recognized in all states where it will do business, with respect to: (a) limited liability, and (b) partnership tax treatment.
For more information on the status of limited liability legislation in your state contact your state society or the AICPA state legislation division at (202) 434-9222.
There are limited liability companies (LLC), limited partnerships (LP) and S corporations.
The law also permits partnerships to register as Limited Liability Partnerships (LLP), professional partnerships to register as Registered Limited Liability Partnerships (RLLP), and recognizes LLPs from other jurisdictions.
It noted that the LLC generally afforded the taxpayer limited liability with respect to LLC obligations.
As previously announced, Bruce Ratner has contributed his ownership interests in the 30 operating properties, the service companies and participation rights in all future developments (except those named below) to a newly formed limited liability company.
The premise of limited liability for LLC members may be breached when the articles of organization require additional capital contributions as certain events occur, when other states do not recognize the LLC member's limited liability or when an insolvent LLC makes distributions to a member.
NYSE:VLI), announced today that it has closed its secondary public offering of 20,550,000 units representing limited liability company interests at a price of $21.
Thus, the liability exposure under the PC is greater than that under the ordinary limited liability business corporation.

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