Limited liability is one of the most successful commercial creations of all time, almost singularly responsible for the growth and expansion of capitalism. We all need good credit – but please – this is ridiculous.
But what is it about limited liability that makes it so successful? Indeed, is the structure of limited liability fair as regards creditors, who ultimately bear the brunt of this mechanism? Limited liability in general means a sacrifice of privacy in return for the benefit of limited personal liability. In layman’s terms, this means that the company promoter is not personally liable for any of the company’s debts, thus encouraging risk and promoting enterprise. Small business are struggling to make it – the laws of the land can be a real pain in the booty. At the back end, however, these businesses leave behind a trail of debts that ultimately result in financial loss for lenders and those that operate on credit terms. This raises the general question of whether limited liability as a creation is fair for the creditors it so apparently prejudices?
Credit terms are flexible in many cases. There is no reason a loan should be introuble of defaulting unless the party is not responsible.
