Which statement describes limited liability?

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Multiple Choice

Which statement describes limited liability?

Explanation:
Limited liability means that owners’ personal assets are protected from the business’s debts because the business is a separate legal entity. Creditors can only claim against the assets of the business, not the owners’ personal wealth. This is exactly what the statement describes, making it the best description of limited liability. The other ideas miss the point: personal liability for debts would be unlimited liability, dividend requirements relate to profit distribution rather than liability, and a company cannot be sued is simply false since corporations can be sued but personal assets remain protected.

Limited liability means that owners’ personal assets are protected from the business’s debts because the business is a separate legal entity. Creditors can only claim against the assets of the business, not the owners’ personal wealth. This is exactly what the statement describes, making it the best description of limited liability. The other ideas miss the point: personal liability for debts would be unlimited liability, dividend requirements relate to profit distribution rather than liability, and a company cannot be sued is simply false since corporations can be sued but personal assets remain protected.

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