limited liability

Legal safeguard that allows shareholders to be liable for their company's debts only up to and including the value of their shareholding. For example, if a limited liability company goes bankrupt with debts of £1 million, the shareholders are not liable for any of that debt, although the value of their shares in the company would be worthless.

Private and public limited companies, cooperatives, and public corporations have limited liability in the UK, but sole proprietorships and most partnerships do not. Limited liability has enabled limited liability companies to attract individuals and organizations to buy their shares and thus finance expansion. This has been very important in the development of capitalism in free enterprise economies.