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Explain the term 'Limited Liability'. - Leaving Cert Business - Question 4 - 2015
Question 4
Explain the term 'Limited Liability'.
Worked Solution & Example Answer:Explain the term 'Limited Liability'. - Leaving Cert Business - Question 4 - 2015
Step 1
Limited Liability Definition
Answer
Limited Liability refers to a legal structure that protects the owners of a company from being personally liable for the company's debts or financial obligations. Specifically, it means that if a company goes bankrupt, the owners are not responsible for the company's debts beyond the amount they have invested in the business.
Step 2
Protection of Personal Assets
Answer
The principle of Limited Liability ensures that personal assets of the owners cannot be taken to settle business debts. This protects the owners' personal financial situation and allows them to venture into business without the fear of losing their personal wealth.