What is the personal liability of a shareholder in a corporation?

What is the personal liability of a shareholder in a corporation?

• A. Not limited
• B. Limited to the shareholder's ownership percentage
• C. Limited to liabilities incurred by that shareholder and excluding liabilities incurred by other shareholder, directors or officers
• D. Limited to the amount invested by that shareholder in the corporation

Answer: (D)

A corporation is a separate legal entity, so shareholders typically aren’t personally liable for the business’s debts. This protection means a shareholder’s personal liability is limited to the money they invested in the company. It doesn’t depend on how much you own or on liabilities incurred by other shareholders, directors, or officers. There are exceptions—such as when a shareholder personally guarantees debt, or when the corporate veil is pierced due to fraud, undercapitalization, or failure to follow corporate formalities—but in ordinary cases the liability stays within the amount invested.

A corporation is a separate legal entity, so shareholders typically aren’t personally liable for the business’s debts. This protection means a shareholder’s personal liability is limited to the money they invested in the company. It doesn’t depend on how much you own or on liabilities incurred by other shareholders, directors, or officers. There are exceptions—such as when a shareholder personally guarantees debt, or when the corporate veil is pierced due to fraud, undercapitalization, or failure to follow corporate formalities—but in ordinary cases the liability stays within the amount invested.