A) To accept passive investments
Would you purchase stock in WorldCom if you'd be liable for their debts?
B) To allow for high risk ventures
Would you start a satellite communications company or biotech research firm
knowing if it failed you'd be liable for billions of dollars in debt?
There are many other reasons, but these two are the must crucial.
Also, two misconceptions:
A) That limited liability shields liability from consequence of actions.
No, officers are liable of any criminal actions (fraud, etc) of a company,
and any employee (owner or not is irrelevant) may be sued directly for
liabilities their actions caused due to negligence.
B) That the "State" creates limited liability.
Limited liability entities existed prior any state sanction, let alone state
enforced monopoly over them.
Adam
----- Original Message -----
From: <[EMAIL PROTECTED]>
To: <[EMAIL PROTECTED]>
Sent: Thursday, July 18, 2002 7:40 AM
Subject: limited liability[via LSMTP - see www.lsoft.com]
What is the economic argument for limited liability of corporations?
Can anyone suggest some readings on this?
Jason DeBacker
