Limited Liability Features

Three main features of a Limited liability company

The limited liability company has three main features and these are the artificial person, limited liability, and tradable shares. The artificial person means that it is a distinct legal entity created by law and given rights and responsibilities like a regular person. It is so distinct that the shareholders cannot sue it. This feature makes it so powerful because they can improve productivity and they possess the legal rights of a human without the biological disadvantages. They cannot die of old age or get married and bear children. It has no body to be punished nor a soul to be condemned (Wooldridge, 2003). The Romans were believed to have come up with some of the fundamental concepts of

The company could gather information from its trusted factors and gather it on one local market, which is something private businessman could never accomplish.

Limited liability simply implies that investors or shareholders are only responsible in proportion only for the shares they have put into the company. This means that you can only lose the money you have put into the company. Investing in companies was a risky business and this feature eliminates the fear of risk. The limited liability companies only care about profit and giving return to their shareholders in the form of dividend, so it did not matter to them the way they made the profit. They focused more on making money than on prolonging the life of the business. They were therefore called ‘a body with no soul’ because morals did not come to play with them. They have a consequentialist mindset. This means that the decision with the most beneficial consequences is the best decision. The end justifies the means. Adam Smith also disapproved the feature of

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(Wooldridge, 2003)

The third and final feature of a limited liability company is the existence of tradable shares. A tradable share is a share that is traded in an opposite place usually known as stock exchange. Nowadays they are known commonly as an actual part of a company. The origins of tradable shares are not officially known but are believed to have existed as far back as Ancient Rome. The novel capitalism of the 16th and 17th century is what brought stock exchange to its wake.

(Wooldridge, 2003). The first company to trade their shares at a regular stock exchange was the Dutch East India company. Companies usually made voyages to newfound land and they needed people to invest in them to finance their travels.

The only way to get huge substantial donations from investors was by protecting them, because it was dangerous, especially during the period of Colonialism.

Tradable shares and liability were so necessary because the risk of investing in their voyages to new land were as risky as that of space exploration. Tradable shares had some consequences as well, for example it could lead to