Limited liability can best be defined as the legal provision that A. protects bond holders from being sued by other creditors. B. reduces the exposure of sole proprietorships to law suits. C. shields owners of a corporation from losing more than what they invested in a firm. D. gives holders of preferred stock priority over holders of common stock.

Question

Eugene Diaz

Business

20 June, 07:56

Limited liability can best be defined as the legal provision that A. protects bond holders from being sued by other creditors. B. reduces the exposure of sole proprietorships to law suits. C. shields owners of a corporation from losing more than what they invested in a firm. D. gives holders of preferred stock priority over holders of common stock.

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Stella Valencia · Answer 1

C. shields owners of a corporation from losing more than what they invested in a firm.

Explanation:

Limited liability companies are established with the purchase of stock. The owners are known as shareholders or stockholders. The stock or share represents the unit measurement of ownership by each shareholder or owner of the business.

It is called a limited liability company because the liability of the owners is limited to the amount invested in the firm. This is unlike the sole proprietorship where the owner's liability is said to be unlimited.