Question

What is limited liability?

• A. Limited liability refers to how much the directors have to contribute in the event of the company becoming insolvent.
• B. Limited liability refers to the ability of a member to limit his liability.
• C. Limited liability refers to the directors ability to limit their liability for acts of negligence, fraud etc.
• D. Limited liability refers to the ability of a company to limit its liability.

Answer 1

Answer: (B)

Limited liability refers to the ability of a member to limit his liability.

Limited liability is where 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. If a company with limited liability is sued, then the claimants are suing the company, not its owners or investors.