Question

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

Answer 1

SOLUTION:-

Limited liability ensure 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 captial 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.

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