Tag Archives: Limited liability

Limited in Limited Company??

I receive a question on Quora which may interest readers of this Blog. The question is –

What is limited in private limited company? I understand limited means limited liability but can someone explain with a detailed example about how this liability turns out to be limited. Please use numerical in the example. Lets consider 4 owners, each one has 25% stake in the company & the total investment is say 1 lac INR.”

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What is benefit of incorporating of a company? One of most important benefit of incorporation is limiting risk of liability.

In case of traditional form of businesses; proprietor, partnership or family businesses; there is no concept of limited liability. An owner or part – owner is responsible to pay all business debt even from its own pocket. We always know, business money (galla) is different from personal money. But, owner of a business remains in risk of liabilities towards creditors and government personally.

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What is significant of word “limited” in name of a business organization?

In rural and semi urban India, this is a majority opinion that risk of a person dealing with is limited. Such persons may be petty investors, public depositors, unemployed youth, farmer, retired citizens, daily wagers and all potential victims of corporate criminals. I have met many persons, who support this limited risk perception. I have no idea about source of such wrong information.

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