Limited Liability

Definition

An important characteristic of [wex:corporations] and other business organizations like the [[wex: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 [wex:shareholder|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 [wex:piercing the corporate veil].   

See also

  • [[wex:Corporation]]
  • [[wex:Limited liability company (LLC)]]