What is limited liability, and why do I need it?

March 16, 2012

“Limited Liability” means that an investor will not be automatically held personally liable for acts of the business, including those acts of other investors, beyond the amount of the individual’s investment. This is important, because it protects your personal assets from creditors.

Having limited liability, however, does not give someone a blanket protection from any lawsuits. There are ways to pierce the limited liability shield for an investor’s actions, thereby making the investor personally liable.

It is important to note that shareholders who sign personal guarantees of any kind will still be held liable for the amount of the guarantee.

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