What Is Limited Liabilty?
Limited liability is a principle of business law which shields the owners of a business from the business's liabilities. Owners of a business which has limited liability may lose only what they have invested in the business, meaning creditors cannot reach to the owner's personal assets to cover the businesse's debts. If a business is sued or goes bankrupt only the assets of the business may be used to cover the debt, a stockholder may not be forced to sell their home or other property to cover their share of the company's debt. Businesses that have limited liabilty are corporations, limitied liability companys (LLC) and limited liability partnerships (LLP).
In a business that is a sole proprietorship or a partnership the owners are personally liable for the business's debts.
