Illustrate the term Liabilities

Question

Illustrate the term Liabilities?

Answer 1

A corporation incurs its own debts and is responsible for their repayment.  Shareholders have limited liability: their liability for the corporation’s debts is limited to their investment (i.e., what they paid for their shares). From a practical perspective, banks may be unwilling to lend to small corporations without a personal guarantee from major shareholders, thus putting personal assets at risk. Limited liability will not necessarily protect shareholders from personal liability for their own acts.