Limited liability of the owners means that the stockholders of a corporation share a personal liability for all debts of the corporation.
I'm sorry, but that statement is not accurate. Limited liability means that the owners or shareholders of a corporation are not personally liable for the debts and obligations of the corporation. Their liability is limited only to the amount of their investment in the company.
To understand why this is the case, let me explain how a corporation is structured. A corporation is a separate legal entity from its owners, known as shareholders. When a corporation is formed, it is granted a legal personality that is independent of its shareholders. This legal separation is important because it protects the shareholders from bearing the burden of the corporation's debts.
In the event that a corporation incurs debts or faces financial obligations, the creditors of the corporation can only go after the assets owned by the corporation itself. They cannot go after the personal assets of the shareholders, such as their homes, bank accounts, or other investments, to satisfy the corporation's debts.
This limited liability protection encourages investment in corporations, as shareholders can invest in the business without the fear of losing more than their initial investment. It also promotes economic growth and entrepreneurship, as it allows individuals to take risks and start businesses without risking their personal assets.
It's important to note that limited liability protection is only applicable to corporations and not other business entities like sole proprietorships or partnerships. In those cases, the owners bear personal liability for the debts of the business.
I hope this explanation clarifies the concept of limited liability for you.