Explain the concept of limited liability in case of a company?

Question

Explain the concept of limited liability in case of a company?

Answer 1

if you are in a partnership and the partnership goes under and owes people money then the liquidators can take the personal assets of the partners like houses, shares etc.

If a company goes under and owes people money the creditors can only take the assets of the company and can't touch employees personal assets. The financial liability is limited to the company.

This being said in recent times there have been significant financial penalties to directors of companies who cause companies to collapse through negligent or fraudulent actions.

Answer 2

when someone starts ther own company, limited liability ensures that should the company fall on hard times and go bankrupt, the owners personal property such as there house, car, or personal bank accounts are protected from the companys creditors.