Reply To: Limited Liability


The limited liability provision in corporations encourages at least three things that are good:

-risk taking by companies that individuals might other wise not take;
-stewardship by companies of other investors’ money for which they will be rewarded if they do right by them and grow the company and its profits; and
-investor vigilance to make sure that they entrust money to the right management with the right ideas-knowing that their only recourse to a failed investment is a) in the case of a loan to the company, the assets of the company where they may get pennies on the dollar or b) in the case of an equity investment-probably nothing as the equity investor come just about last in bankruptcy

There are cases at law that allow shareholders to “pierce the corporate veil” and attach the assets of the shareholders and managers

All in all the concept of limited liability corporations has dramatically increased trade and innovation.

There are some abuses but most are because of fraud which can be dealt with in the courts (public or private)