Limited Liability

1/25/2024 pgd

Best Bike Co.'s investors from the last chapter had two concerns. The first, which we will address in this chapter, is what liability do investors face if someone is injured at the bike shop? If Best Bike Co. cannot pay its bills, are the shareholders liable? By buying a $10 share of stock, are they risking losing their homes in a lawsuit? Are there situations when they should?

This chapter discusses how limited liability protects shareholders, arguments for and against this policy, transactional structures to best make use of this policy, and ways that shareholders can still be liable, including veil piercing and a reprise of some agency concepts.

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