Limited Liability


Limited Liability
   The status of limited liability gives a business a legal personality separate from that of its shareholders and limits the liability of shareholders for the debts incurred by the business, normally to the amount of their investment. The development of limited liability laws facilitated the growth of joint stock companies owned in the main by nonactive shareholders: a shareholder knew that his potential losses in the event of business failure were limited to the amount of his investments and had legal protection against being pursued at law for debts incurred by a company whose daily operations he knew little about. By removing a powerful disincentive to investment, limited liability laws mobilized large amounts of capital, including the savings of small investors.
   Although limited liability companies had long been known before the passage of limited liability laws, the status had required a special charter, granted by the crown or a legislature, similar to those granting monopolies or other privileges to entities such as the British East India Company. In Britain a Limited Liability Act of 1856 made the status generally available; in the United States corporate law was generally a state matter, and limited liability laws were often resisted until the late nineteenth century. Limited liability principles became part of the Prussian Commercial Code in 1861 and then spread quickly to other German states; France passed similar laws in 1863 and 1867. Because such laws stimulated investment by the growing European middle class, they put an enormous pool of capital at the disposal of overseas investment and thus contributed to intensified imperial competition in the second half of the nineteenth century.
   See also <>.
   FURTHER READING:
    Ferguson, Niall. The Cash Nexus: Money and Power in the Modern World, 1700–2000 . New York: Basic Books, 2002;
    Freedman, C. E. Joint Stock Enterprise in France, 1807–1867: From Privileged Company to Modern Corporation . Chapel Hill: University of North Carolina Press, 1979;
    Hunt, B. C. The Development of the Business Corporation in England, 1880–1867 . Cambridge, MA: Harvard University Press, 1936.
   MARK F. PROUDMAN

Encyclopedia of the Age of Imperialism, 1800–1914. 2014.

Look at other dictionaries:

  • Limited liability — is a concept whereby a person s financial liability is limited to a fixed sum, most commonly the value of a person s investment in a company or partnership with limited liability. A shareholder in a limited company is not personally liable for… …   Wikipedia

  • limited liability — Shareholders in a limited company are only liable to third parties to the limit of their shareholding. Other participants e.g. directors would not normally have any personal liability except with respect to creditors where there has been wrongful …   Law dictionary

  • Limited liability — Liability Li a*bil i*ty (l[imac] [.a]*b[i^]l [i^]*t[y^]), n.; pl. {Liabilities} ( t[i^]z). [1913 Webster] 1. The state of being liable; as, the liability of an insurer; liability to accidents; liability to the law. [1913 Webster] 2. That which… …   The Collaborative International Dictionary of English

  • limited liability — noun the liability of a firm s owners for no more than the capital they have invested in the firm • Hypernyms: ↑indebtedness, ↑liability, ↑financial obligation * * * noun 1. : the liability of shareholders in a corporation or a limited company 2 …   Useful english dictionary

  • limited liability — a liability restricted by law or contract, as the liability of owners of shares in a corporation or limited company, or that of a special partner. [1850 55] * * * Condition under which the loss that an owner (shareholder) of a business may incur… …   Universalium

  • limited liability — Limitation of loss to what has already been invested. Bloomberg Financial Dictionary See equity shares. Dresdner Kleinwort Wasserstein financial glossary When the liability of the shareholders is limited to the nominal value of their shares, it… …   Financial and business terms

  • Limited liability — Limitation of possible loss to what has already been invested. The New York Times Financial Glossary * * * limited liability limited liability ➔ liability * * *    A restriction of the owners loss in a business to the amount of capital they have… …   Financial and business terms

  • Limited Liability — A type of liability that does not exceed the initial amount a person invested into a partnership. Limited liability refers to the terms of limited partnerships, which comprise at least one general partner, who takes on unlimited liability, and… …   Investment dictionary

  • limited liability —    The maximum amount a business owner or investor can lose if the business is subject to debts, claims or other liabilities. An owner of a limited liability company or an investor (shareholder) in a corporation usually stands to lose only the… …   Business law dictionary

  • limited liability — See: limited company, limited liability partnership …   Accounting dictionary


Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.