ABSTRACT
Limited liability for business enterprises underpins the capitalist system by encouraging risk-taking and entrepreneurship. By setting up as a public limited company (in the UK) or corporation (in the USA) fi rms can attract capital from investors who know that, although their investment funds are at risk, they will not be responsible beyond this for the debts of the company. Similar protection is offered to directors and employees of the fi rm, provided they operate within the law and in good faith. If the company fails, its debts fall upon its unfortunate creditors, once all assets have been sold. Limited liability is undoubtedly a privilege. Society is rewarded for its grant of limited liability to fi rms by the wealth that is created through the resulting enterprising behaviour.
