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What is Limited liability?

Limited liability: Owners risk only what they invested, not personal assets.

Where Limited liability fits

Limited liability is part of Owners & Shares in Finance. Owners hold shares and earn through dividends. Limited liability caps their loss at what they invested, and stock options reward staff with ownership.

Practical tip

Decide whether you want growth (reinvest) or income (dividends).

Related terms

Shareholder
A person or firm that owns shares in a company.
Dividend
A share of profit paid out to shareholders.
Stock options
The right to buy company shares at a fixed price, used as a perk.
Stock split
Dividing shares into more shares, lowering each price without changing total value.

Formulas you will use with it

Dividend yieldEarnings per share

Test yourself

Which term means: “Owners risk only what they invested, not personal assets.”?

Limited liability · Stock options · Dividend

Answer: Limited liability

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