Limited liability means the stockholders are not held personally responsible for the financial obligations of the corporation.

Business

1 answer:

sp2606 [1]3 years ago

5 0

Answer:

True

Explanation:

Limited liability - legal liability when the SHAREHOLDERS or founders are liable for the obligations of the company only to the extent of the capital invested in it. We can not say the stakeholders have obligations. The stock holder is the same meaning with shareholder.

The limitation of liability is one of the principles underlying the concept of a legal entity, namely that a legal entity, although an abstraction, actually has a number of features of a real person (i.e. a person), in particular, it is itself capable of having rights and bear obligations, thus limiting the rights and obligations (including liability) of persons who are participants in such a legal entity. Among the various organizational and legal forms of legal entities provided for by the laws of different countries of the world, not everyone provides a limitation of liability to persons standing behind these legal entities. The extent and nature of the limitation of such liability also varies. In some legal systems, limitation of liability is considered as a privilege that is granted to participants in a legal entity in return for fulfilling certain requirements (compliance with corporate procedures, etc.); and in case of non-compliance with these requirements, this privilege may be deemed unreasonable, and the responsibility is transferred to the property of such participants. The economic meaning of limiting liability is to stimulate the economic activity of citizens and make more active use of investment opportunities. The existence of modern public capital markets (and, above all, exchanges) is not possible without the principle of limited liability.

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