Liability limitation exists in order for people to take risks without losing everything. A person or persons can form a company (such as a corporation or limit

Liability limitation exists in order for people to take risks without losing everything. A person or persons can form a company (such as a corporation or limited liability company), invest assets in it and so long as they conduct business properly their personal assets are safe from business creditors. Part of conducting business properly is typically that counterparties know that they are dealing with a limited-liability structure (e.g. by ‘inc.’ or ‘limited’ in the name); another part is complying with the law (e.g. typically failure to pay employees can lead to claims on personal assets). This offloads some risk from the owners of the company to its business partners, it ended up enabling a real revolution in business formation and ownership. In a lot of ways it has had a democratising effect, as many more folks can afford to invest in a company than just those who are wealthy enough to bear the risk of unlimited liability.