Limited Liability Meaning

The phrase limited liability is used in the context of partnership and company, when 2 or more person decide to do business in partnership than one of the partner may decide to have only limited liability, similarly when a company is listed on stock exchanges the shareholders of the company also have limited liability to the extent of number of shares held by them.

It means that in the event of bankruptcy the creditors of the company cannot compel the partner or shareholder to liquidate their personal assets, creditors can only liquidate company’s assets.

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