Which of the following types of firms have limited liability?a.Partnerships (general) and corporationsb.Sole tradersc.Corporationsd.Partnerships (general)e.Joint Venture
Question
Which of the following types of firms have limited liability?a.Partnerships (general) and corporationsb.Sole tradersc.Corporationsd.Partnerships (general)e.Joint Venture
Solution
The types of firms that have limited liability are corporations. So, the answer is c. Corporations. In a corporation, shareholders' liability is limited to the amount they have invested in the company. If the company goes bankrupt, the personal assets of shareholders are not at risk. This is not the case for general partnerships and sole traders, where the personal assets of the owners can be used to pay off business debts. Joint ventures may or may not have limited liability, depending on how they are structured.
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