Limited liability refers to the liability of the shareholders/investors for the obligations and judgements against the company. Their liability is "limited" to

Limited liability refers to the liability of the shareholders/investors for the obligations and judgements against the company. Their liability is "limited" to the amount of their investment. Contrast with a partnership, in which the owners/investors are subject to potentially unlimited liability. For example: LLC A settles a lawsuit for $10 million. Investors B and C's liability is limited to the size of their investment (we'll say $100). Partnership X settles a lawsuit for $10 million. Partners Y and Z are each liable for the $10 million (the opposing party only gets to collect $10 million once, he simply can choose to go after either or both partners for payment). The opposing party can go after Partners Y'z and Z's personal assets, unless they declare bankruptcy.