Stockholders of a corporation have limited liability, which means they are only responsible for the debts and obligations of the corporation up to the amount they have invested in the company’s stock. This protects their personal assets from being used to pay off the corporation’s debts. If the corporation faces losses or goes bankrupt, stockholders are not required to pay any more than what they have invested.
In contrast, if stockholders had unlimited liability, they would be personally responsible for all debts and losses incurred by the corporation, meaning they could potentially lose more than their initial investment. This fundamental principle of limited liability is one of the key advantages of incorporating a business, as it encourages investment and entrepreneurship while protecting individual investors.