Limited Liability

Limited liability is a legal concept that limits the financial liability of an individual or company to the amount of capital invested in the business. This means that if a company goes bankrupt, the shareholders cannot be held personally liable for the company's debts. Limited liability is a key feature of corporate law and is designed to encourage investment by reducing the risk of personal loss.

There are two main types of limited liability:

• Company limited by shares: This is the most common type of limited liability company. Shareholders are only liable for the amount of money they have invested in the company.
• Company limited by guarantee: This type of company is formed by a group of people who agree to contribute a certain amount of money to the company in the event of its liquidation. The shareholders are not liable for any debts beyond this amount.

Limited liability can be a significant advantage for businesses, as it allows them to raise capital from investors without exposing those investors to unlimited liability. However, it is important to note that limited liability does not protect shareholders from all risks. For example, shareholders can still be held liable for their own negligence or fraud.

Limited liability is a complex concept with a number of important implications. It is important to consult with an attorney before forming a limited liability company to ensure that you understand the full implications of this type of business structure.

In addition to the two main types of limited liability companies described above, there are also a number of other types of limited liability entities, such as limited partnerships, limited liability partnerships, and limited liability limited partnerships. These entities each have their own unique features and advantages, and it is important to consult with an attorney to determine which type of entity is right for you.