How does the concept of limited liability assist big companies to exist in a country

On this page we will discuss how the concept of limited liability assists big companies to exist in a country.

How does the concept of limited liability assist big companies to continue to exist in a Country

The concept of limited liability plays a significant role in assisting big companies to exist in a country. Limited liability means that the shareholders of a company are only liable for the debts and obligations of the company up to the amount of their investment, and their personal assets are not at risk. The concept of limited liability assisting big companies to continue to exist in a country provides significant benefits to big companies in the following ways:

  1. Encourages investment: Limited liability encourages investors to invest in a company by limiting their personal risk. This, in turn, can help big companies raise the necessary capital to operate, expand, and innovate.
  2. Promotes innovation: The concept of limited liability allows big companies to take risks without fear of personal liability, which can encourage innovation and experimentation. Companies can explore new technologies, products, and services without worrying about the potential financial risk to their personal assets.
  3. Facilitates growth: Limited liability can facilitate the growth of big companies by allowing them to attract more investors and borrow more money to fund their operations. This, in turn, can create more jobs and contribute to the economic growth of the country.
  4. Fosters competition: Limited liability allows big companies to compete on a level playing field with other companies, regardless of their size. This, in turn, can help foster healthy competition, which can lead to better products, services, and prices for consumers.

In conclusion, limited liability is a key concept that enables big companies to operate and grow in a country. By limiting the personal risk of investors, promoting innovation and growth, and fostering healthy competition, limited liability can contribute to the economic success of the country as a whole.

Examples of how companies are protected by limited liability in South Africa

Example 1: an employee of the company is found conducting illegal environmental activities. Legal action can be threatened against the company to pay for damages. The court can go after the assets of the firm, but not the owners, to pay for the damages. The exception would be if the owner was aware of the illegal activities and continually allowed them to happen.

How does the concept of limited liability assist big companies to exist in a country?
How does the concept of limited liability assist big companies to exist in a country?

Business Management Grade 12 Question and Answers Online Quizzes

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Resources

https://www.investopedia.com/terms/l/limitedliability.asp

https://www.nolo.com/legal-encyclopedia/limited-liability-protection-llcs-a-50-state-guide.html

https://smallbusiness.chron.com/concept-limited-liability-3693.html

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