Under limited liability, is the owner personally liable for business debts?

Under limited liability, is the owner personally liable for business debts?

• A. Yes
• B. No
• C. Only if the company is not incorporated
• D. Depends on tax status

Answer: (B)

Limited liability creates a separation between the owner and the business. The company becomes its own legal entity, so debts are owed by the company, not by the owner. Owners are protected for the amount they’ve invested, and they aren’t personally liable for the company’s debts. The only times personal liability can arise are if the business isn’t properly incorporated (no separate legal entity) or if the owner personally guarantees a loan or commits wrongdoing like fraud. Tax status doesn’t determine liability. So, the correct outcome is that the owner is not personally liable for business debts.

Limited liability creates a separation between the owner and the business. The company becomes its own legal entity, so debts are owed by the company, not by the owner. Owners are protected for the amount they’ve invested, and they aren’t personally liable for the company’s debts. The only times personal liability can arise are if the business isn’t properly incorporated (no separate legal entity) or if the owner personally guarantees a loan or commits wrongdoing like fraud. Tax status doesn’t determine liability. So, the correct outcome is that the owner is not personally liable for business debts.