Answer to Question #297528 in Accounting for Mifthaah

Question

Distinguish between limited liability and joint several liabilities. What is the significance of these two terms in lending?

Answer 1

Limited liability is a form of legal protection for shareholders and owners preventing them from being held personally responsible for their company’s debts or financial losses while joint several liability is where two or more persons are liable for the same liability. The significance of knowing the type of liability is that one is able to make a decision when lending or investing money in to venture that he knows what to do in case the organization is able to meet it's obligations in terms of payments.