The concept that restricts the amount of money that can be lost from the owners if the business goes into bankruptcy?

The concept that restricts the amount of money that can be lost from the owners if the business goes into bankruptcy?

• A. Charities
• B. Not-for-profit Organizations
• C. Limited Liability
• D. Company

Answer: (C)

Limited liability means owners can only lose what they invested in the business. Because the business is a separate legal entity, if it goes bankrupt, creditors can claim the company’s assets but not the owners’ personal wealth. This protection encourages people to invest, knowing their personal finances aren’t at risk beyond their stake. Charities and not-for-profit organizations describe purpose or status rather than liability protection, and a company is the form that can have this protection, but the concept itself is limited liability.

Limited liability means owners can only lose what they invested in the business. Because the business is a separate legal entity, if it goes bankrupt, creditors can claim the company’s assets but not the owners’ personal wealth. This protection encourages people to invest, knowing their personal finances aren’t at risk beyond their stake. Charities and not-for-profit organizations describe purpose or status rather than liability protection, and a company is the form that can have this protection, but the concept itself is limited liability.