Legal Definitions - shareholder's liability

Shareholder's liability refers to the legal responsibility of a shareholder for the debts and obligations of a corporation. This means that if the corporation cannot pay its debts, the shareholder may be held personally liable for the remaining amount.

For example, if a shareholder owns 10% of a corporation and the corporation has a debt of $100,000, the shareholder may be liable for $10,000 if the corporation cannot pay the debt.

This type of liability can be limited by law or contract, such as in the case of a limited liability company (LLC) where the shareholders are only liable for the amount of their investment in the company.

It is important for shareholders to understand their potential liability before investing in a corporation or becoming a shareholder.