limited liability

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limited liability

n. the maximum amount a person participating in a business can lose or be charged in case of claims against the company or its bankruptcy. A stockholder in a corporation can only lose his/her investment, and a limited partner can only lose his/her investment, but a general partner can be responsible for all the debts of the partnership. Parties to a contract can limit the amount each might owe the other, but cannot contract away the rights of a third party to make a claim. (See: corporation, shareholder, limited partnership, partnership, liquidated damages)

References in periodicals archive ?
9) In our main analysis, we excluded firms with unlimited liability because there is no clear distinction between entrepreneurs' firm wealth and out-of-firm wealth without the protection of limited liability.
In Table 4, column 1 presents the estimation result of regression 2 that includes both limited and unlimited liability firms.
A bank with unlimited liability, like those in California and Scotland, could not pass along any of the losses to depositors.
The partners carry unlimited liability to the extent of their shares in the company.
The unit will be managed by Evrard Bordier, who joined the bank as a partner with unlimited liability on 1 January.
The private partnership form of organization naturally reduces risk-taking incentives due to the fact that partners face unlimited liability.
Moreover, unlimited liability leads to higher pricing of all capital as creditors come to recognize the need to price in the riskiness of their investments.
They have argued that limited liability should be countenanced because an alternative scheme of unlimited liability would impose greater costs on economic production, including an increase in agency and capital costs.
A partnership limited by shares has both general partners with unlimited liability and partners whose liability is limited by their shares in the capital.
In 2006, the EU addressed the impact of unlimited liability on audit firms, in conjunction with issuing an audit directive seeking to harmonize audit requirements throughout the EU (Ashwani Kochhar and Melissa Oxnam, "Client Advisory: UK Gives Auditor Liability Limitation Agreements a Greenlight but US Is Unlikely to Do the Same," Edwards Angell Palmer & Dodge, April 2008, www.
A hybrid is an entity--normally a Canadian unlimited liability company (ULC)--that is treated as a corporation for Canadian tax purposes, but as a flow-through for U.
If the firm was a traditional unlimited liability partnership, the partners may yet remain personally liable for the debt.

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