Question

what is limited liability? why does the goverment grant limited liability to the owners of corporations? Why is limited liability more important for firms trying to raise funds from a large mumber of investors than for firms trying to raise funds from a small number of investors?

Answer 1

Limited liability ensures that:-Shareholders of a business will not lose more than their interest in the company. The government gives corporate owners limited liability:-to reduce the risk of shareholders and thereby promote corporate investment.

Limited Liability becomes more important to companies seeking to collect capital from a large num of investors rather than a tiny num of investors so investors who make a small investment in the company may be unable to lose all their personal assets if the firm fails.