An important characteristic of corporations and other business organizations like the Limited Liability Company (LLC), is that investor liability is limited to the extent of their investment. That is, if the company loses a lawsuit or has other debt, the judgment is against the company, and not its owners, or shareholders. If the judgment or debt makes the company go bankrupt, the shareholders would lose the value of their shares, but, because of the concept of limited liability, the judgment is not enforceable against the shareholder’s other assets.
One exception to limited liability is piercing the corporate veil.
Definition from Nolo’s Plain-English Law Dictionary
A feature of corporations and LLCs where the business owners are legally responsible for paying business debts, claims, and judgments only to the extent of the capital they invested in the business. This means that if the business folds, creditors cannot seize or sell the business owner's home, car, or other personal assets.
Definition provided by Nolo’s Plain-English Law Dictionary.
August 19, 2010, 5:19 pm