Commerce and Personal Liability

Commerce and Personal Liability

Commerce and Personal Liability

There are different benefits for commerce to acquire shareholders. The primary benefit is it allows the shareholders exemption from liability. A commerce financial structure design is to protect shareholders from personal liability of corporate activities. Liability protection for shareholders of a corporation was invented in the 17th century (“Companies Incorporated,”2013).

Creditors look to the assets of a corporation for payment not the shareholders personal assets. Shareholders can be millionaires and creditors cannot make them pay the debts of the corporation. Shareholders are only responsible for debts and liabilities up to the value of their equity in the company.

Benefits to shareholders unprotected causes investors to be concerned about personal assets and risk in expensive lawsuits. This concern keeps investors from becoming shareholders. Protecting the benefit of limited liability allows large sums of capital to be raised, shareholders are not afraid to invest, and it minimizes the risk. Limited liability not only encourages entrepreneurship but also facilitates money for investments that can be borrowed to secure financing or contacts.

For most business owners, incorporating a business a business to protect personal assets is a major benefit to acquiring shareholder. Having shareholders has many benefits and requires a certain amount of legal astuteness in understanding these benefits (Booth & Hamilton, 2005).One should take advantage of the benefits of incorporation, including corporate liability protection.

References

Booth, R., & Hamilton, R. (2005). Hamilton and Booth's Black Letter Outline on Corporations

(5th ed.). : West Law School

Companies Incorporated. (2013). Liability Protection. Retrieved May 8, 2013, from Companies Incorporated: http://www.companiesinc.com