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Explain the term 'limited liability' - Leaving Cert Business - Question A - 2007
Question A
Explain the term 'limited liability'. Goodfoods Ltd is an indigenous company set up by sisters Una O'Sullivan and Jane O'Sullivan and it has 14 full-time employees.... show full transcript
Worked Solution & Example Answer:Explain the term 'limited liability' - Leaving Cert Business - Question A - 2007
Step 1
Explain the term 'limited liability'.
Answer
Limited liability refers to a legal structure in which the financial responsibility of the shareholders in a company is limited to the amount they have invested in that company. This means that if the company faces bankruptcy or is unable to pay its debts, shareholders are only liable for the company's debts up to their investment amount. Their personal assets remain protected, as they cannot be used to settle the company’s debts. This structure encourages investment as it reduces the risk for shareholders.