Which liability protects owners so they are only liable up to the amount invested?

• A. Limited Liability
• B. No Liability
• C. Joint Liability
• D. Unlimited Liability

Answer: (A)

Limited liability means owners’ financial risk is limited to the amount they have invested in the business. If the company can’t pay its debts, the owners’ personal assets aren’t at stake beyond their investment, which is why this protection is so important for investors and shareowners. This differs from unlimited liability, where owners could have to pay all debts out of their own pockets; and from joint liability, where several people are responsible together rather than each being protected to a fixed amount. No liability isn’t a standard form of protection in business structures.