Question

1. In 1809, Massachusetts enacted a law that said that shareholders would face joint-and-several unlimited liability. What is joint-and-several shareholder unlimited liability?

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2. In the early 19^th century, New York law allowed entrepreneurs in certain industries to become corporations without getting a special charter from the state legislature. Why was this “general incorporation” better for companies?

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3. How could limited liability promote business?

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4. For its opponents, what is wrong with unlimited liability and what were its bad effects?

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5. How could unlimited liability hurt entrepreneurs?

Answer 1

As per policy, only one question is allowed to answer, so answering question 1 :

1 The shareholders being the owner and prime investors of the company, there exists a joint and several liability towards all the losses and risk of liabilities which the company has to incure due to one event or the other. All the shareholder has to bear the loss occurred and any kind of damages. Though the liability of the shareholders is limited to the share value, if any urgent loss or liability rose, the shareholders would not deny because the all the final income of the company belongs to shareholder and is shared by them in the form of dividend and kept under the retained earnings to create the worth of their shares. All the shareholders are jointly and severally responsible for the suits and claims from any supplier or any customer.

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