Question

What is a type of business that is owned by stockholders whose liability is limited to the amount they have invested in the business?

Answer 1

Answer:

CORPORATION

Explanation:

Sole Proprietorship, Partnership are business owned & managed by a single owner, group of partners sharing profits.

Both of these business forms, entrepreneur(s) liability is unlimited , implying their assets can be at stake if business assets are insufficient to fulfil its liabilities. Although, there can be certain special limited liability partnership firms also , but the general case is explained as earlier.

However: Corporation is a separate legal entity from its owners, governed by board of directors . Owners & Corporation being separate entities, there is no pressure on the former's assets to fulfil the latter's claims. So , the owners liability is limited , only confined to the amount they have invested.