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 ?
The district court in Illinois held that the insured was entitled to but one limit of liability citing to language similar to that contained in the "loss sustained during prior insurance" clause in the Superstition Crushing matter.
The court held that the foregoing, when read in conjunction with a "loss sustained during prior insurance" clause similar to the one in the Superstition Crushing matter, restricted the insured's recovery to one limit of liability.
As far as can be discerned, the exact same policy form at issue in Superstition Crushing was determined by this Pennsylvania state court to be unambiguous and provide but one limit of liability.
In finding that the liability of the insurer was capped for "every loss" involving the dishonest investment advisor, the district court in Oregon held the insurer's interpretation of the term "occurrence" was the only logical choice and it required payment of but one limit of liability.
In the Employers Mutual case, the insured was arguing that each theft engineered by an employee was a separate "occurrence" under the policy and that the insured was therefore entitled to a limit of liability for each of those separate thefts, even though they comprised one scheme and were attributable to one employee.
It is worthy of note that one final factor weighing in Travelers' favor in the Superstition Crushing case was the prefatory language now contained in the policy forms which make clear that the only exception to the limitation on coverage for losses incurred during the current policy, are those rights given under the "loss sustained during prior insurance" condition, which itself very clearly caps recovery to one limit of liability.
The severity of the provision, specifically about consequential loss, will probably mean that in EMCO's case the actual aggregate limit of liability, calculated by adding the recoverable value of the damaged container of goods and the freight, will be less than the amount allowed by the express provision for aggregate liability, that is by reference to the value of the whole shipment.
It is worth noting, as a final point, the shifting effect on the aggregate limit of liability of expressing it by reference to the limit of liability for the total loss of the goods.
The settlement calls for American Re to be substituted for Inter-Ocean as the reinsurer under the original contract with Business Insurance Group, and to honor the $175 million limit of liability provided in the original contract.
Liability, and Contractor's Pollution Legal Liability (CPL) coverages under one limit of liability.