Answer :
Final answer:
The answer to the question is 'limited liability,' which protects investors' personal assets from being seized for corporate debts or liabilities. This principle encourages investment and helps sustain economic growth. Investors can only lose what they have put into the company, unlike sole proprietorships or partnerships where personal assets are at risk.
Explanation:
The Concept of Limited Liability
The correct term to fill in the blank is limited liability. Limited liability is a crucial principle that protects investors' personal assets from being seized due to the actions or debts of a corporation. In a limited liability structure, the financial responsibility of the shareholders is confined to the amount they have invested in the corporation, shielding their personal property from legal claims against the business.
For example, if a corporation incurs significant debts or faces a lawsuit leading to financial judgments, the shareholders cannot lose more than their initial investment. This contrasts sharply with sole proprietorships or partnerships, where owners may risk their entire personal assets. The importance of this principle lies in its encouragement of investment, as it mitigates risk for investors.
Moreover, this legal protection is beneficial for the overall economy, as it promotes business growth and entrepreneurship, knowing that personal assets are safeguarded against business failures.
Key Benefits of Limited Liability
- Encourages investment by reducing risk for shareholders.
- Allows corporations to raise funds more easily for expansion.
- Protects personal assets from business liabilities.
Learn more about Limited Liability here:
https://brainly.com/question/43852009
