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Business Definition for: limited liability
Dictionary of Accounting Terms
limited liability

one that does not go beyond the owner's investment in a business. A corporation and limited partner enjoy this particular feature. The stockholders of a corporation usually have limited liability; they risk only their investment in the business. Sole proprietorship and general partners have unlimited liability.

See also unlimited liability , partnership
Dictionary of Finance and Investment Terms
limited liability

underlying principle of the corporation and the limited partnership in the United States and the limited company in the United Kingdom that liability is limited to an investor's original investment. In contrast, a general partner or the owner of a proprietorship has unlimited liability.

Dictionary of Business Terms
limited liability

the restriction of one's potential losses to the amount invested; absence of personal liability. Limited liability is provided to stockholders of a corporation and limited partners of a limited partnership . Those parties cannot lose more than they contribute to the corporation or partnership unless they agree to become personally liable. For example, if a person buys $1,000 worth of stock in a corporation, he or she cannot lose more than that amount. However, many lenders require personal guarantees from major stockholders before lending to small or closely held corporations.

Dictionary of Real Estate Terms
limited liability

the restriction of one's potential losses to the amount invested. The absence of personal liability.

Example: Limited liability is provided to stockholders in a corporation and limited partners of a limited partnership . Those parties cannot lose more than they contribute to the corporation, unless they agree to become personally liable. For example, if Collins buys stock in a corporation for $10,000, she cannot lose more than that amount. However, many lenders require personal guarantees of major stockholders before lending to corporations.

See also at-risk rules
Related Terms:
unlimited liability

in asole proprietoror ageneral partnerliability of owners not limited to theowner's investment. In a corporation, stockholders usually havelimited liabilitythey risk their investment in the enterprise but not their personal assets.

partnership

form of business organization created by an agreement between two or more persons who contribute capital and/or their services to the organization. Advantages are: (1) it is easily established with minimal organizational effort and costs; and (2) it is free from special government regulation. Disadvantages are: (1) it carries unlimited liability for the individual partners (firms organized as co-partnerships do not dissolve with the death or withdrawal of a partner); (2) it is dissolved upon the withdrawal or death of any of the partners; and (3) its ability to raise large amounts of capital is limited. general partner are those who are responsible for the day-to-day operations of the partnership and who are responsible for the partnership's total liabilities, while limited partner are those who contribute only money, who are not involved in management decisions, and whose liability is limited to their investment.

at-risk rules

tax term. A taxpayer can deduct losses for tax purposes only to the degree of risk. At-risk amounts are restricted to the cash investment and the debt for which the taxpayer is personally liable. Assume an individual incurs losses from real estate activities of $40,000. If the cash investment and personal debt incurred were $35,000, the most that could be deducted as losses is $35,000. Note there is an expansion of the at-risk amounts to real estate only to include certain nonrecourse loans from qualified lenders.

Copyright © 2005, 2000, 1995, 1987 by Barron's Educational Series, Inc., Reprinted by arrangement with Publisher.
 Copyright © 2006, 2003, 1998, 1995, 1991, 1987, 1985 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
 Copyright © 2007, 2000, 1997, 1987, by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
 Copyright © 2004, 2000, 1997, 1993, 1987, 1984 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
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