limited liability


Definition of limited liability

: liability (as of a stockholder or shipowner) limited by statute or treaty

Examples of limited liability in a Sentence

Recent Examples on the Web

In September 1995, the Trumps formed seven new limited liability companies. Susanne Craig, The Seattle Times, "Trump engaged in suspect tax schemes as he reaped riches from father," 2 Oct. 2018 When setting up a limited liability company (LLC) in states like Delaware, Nevada, and Wyoming, the owner doesn’t even have to list their name. Jeff Andrews, Curbed, "Why financial criminals use real estate to launder money," 10 Aug. 2018 Donors sometimes use limited liability corporations, or LLCs, to make contributions. Theodore Schleifer, Recode, "Reid Hoffman is learning an early rule of being a megadonor: It’s hard to keep track of your money," 26 Dec. 2018 Those who use cash and want to hide their identity usually use a limited liability corporation, or LLC, which typically exists only for the transaction. Mike Rosenberg, The Seattle Times, "King County’s secret all-cash homebuyers must reveal true identity to law enforcement," 20 Nov. 2018 The approximately 75 firms, most of them limited liability companies, were behind more than one out of every 10 eviction cases filed last year in the county, a Milwaukee Journal Sentinel analysis found. Kevin Crowe, Milwaukee Journal Sentinel, "'He'll evict you in a minute.' Landlord quietly becomes a force in Milwaukee rental business...and eviction court," 13 July 2018 Those are partnerships, sole proprietorships, limited liability companies and S corporations, and their owners pay their business taxes through their individual tax returns. Richard Rubin, WSJ, "U.S. Government Revenues Drop in Wake of Tax Cuts," 12 July 2018 The seller is a limited liability company called SMIR 3001 LLC, based in Miami. David Lyons,, "20-story office tower could be built across from Gulfstream Park in Hallandale," 12 July 2018 Operating agreements are a normal part of setting up a limited liability company, which also can help protect the parents’ assets from lawsuits and other problems created by the business. Liz Weston, The Seattle Times, "Can you afford to help your kid start a business?," 9 July 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'limited liability.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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First Known Use of limited liability

1848, in the meaning defined above

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Last Updated

6 Feb 2019

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The first known use of limited liability was in 1848

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More Definitions for limited liability

limited liability


Financial Definition of limited liability

What It Is

Limited liability is limited exposure to financial risk by investors of a company or a partnership. This exposure is usually limited to the individual's investment.

How It Works

In certain cases where an investor invests his money with a company or partnership, this investor will not be liable for any financial risk beyond what he has invested in the business entity. These types of entities are normally limited liability partnership arrangements and limited liability companies.

For example, if an investor enters into an agreement to join a LLC, his investment of $100,000 is his total liability. In other words, he can potentially lose all of this and no more. He won't be liable for any liability beyond this initial $100,000. If he were to invest additional sums, this limited liability would then match his total contribution.

Sole proprietorships and general partners in general partnerships, on the other hand, have unlimited liability.

Why It Matters

This concept of limited liability enters into the decision making equation of businesses and investors when forming a business entity, otherwise known as choice of entity. Depending on the risks and investments of all the participants, the decision may be made to organize a business with limited liability due to many factors, including but not limited to, taxes, dividends, risk, duration, profession and control.

Source: Investing Answers

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