When the initial shareholders – known as subscribers – form the company, they allocate themselves shares in the company. When legal claims are made, they are made by the company sued and be sued: when legal threats are made, they are made against the company.own property: it can buy, sell and own land and any other asset, such as shares, just like an individual.That legal entity has all of the attributes of an individual – a human. Just like a natural person the company can: When the company is formed (ie incorporated) a new legal person is created.
Take as an example limited liability companies which are limited by shares. The concept of limited liability applies to limited companies and any legal entity which is incorporated. There was a greater risk doing business with a limited company, and still is.
The use of the word "Limited" in company names was originally required as a warning to those doing business with the company that liability of those involved with the company did not have unlimited liability. When a company is formed, the word "Limited" forms part of the company name. Limited Liability v Personal Liability ie unlimited liability.Shareholders' Liability for Company Debt to Creditors.When "piercing the corporate veil" takes place, limited liability is no longer available to the shareholders and their personal assets are at stake to pay the debts of the company. It is this concept of limited liability that lays the groundwork for the success of modern economies. ring-fencing personal assets of the shareholders: cash held in bank accounts, cars, houses, shares owned in other companies – from those of the legal entity in which they own shares.people to incorporate a business and avoid incurring further liability if the business is not a success, by.Limited liability creates an invisible barrier around the personal assets of the shareholders and directors: the corporate veil. It protects the personal assets of individuals forming and investing in companies when companies fail and become insolvent: ie bankruptcy, but for companies. Limited liability is the benefit of incorporation of legal entities.
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