As Ambrose Bierce said:
“Corporation. An ingenious device for obtaining individual profit without individual responsibility.”
Create a company – the money you make with your company is yours, but the risk you take is limited. In case you didn’t know, that is in fact why companies are called “Limited” or “Ltd.”. The word implied is “liability”. Limited liability. The owners of the company will lose no more money than what they invested in it.
These are all very basic facts about the concept of corporation and you probably already knew all of the above.
You can establish a company that is high risk, high yield. If you win, you win – if you don’t win, you only lose what you invested. There is an imbalance between what you can win and what you can lose.
It’s unlimited how much you can win
It’s limited how much you can lose.
So why did society invent a fundamentally unbalanced concept like this? Well, it actually makes sense. If a rich investor risks losing her entire fortune from an investment in one unsuccessful company, she will be reluctant to invest at all. But companies need investments to grow – so in short, the concept of limited liability has been introduced to encourage investments and to allow companies to grow, which in turn enables them to contribute more to society through products, services and employment.
So all in all, the concept of limited liability is quite alright.
But not so fast! Yes, as a company owner, your financial liability is limited. However, you’re still morally liable and responsible for what you do, whether you act on behalf of your company or not. It’s not a valid excuse for disregarding ethics, that you are following orders or, worse, following a company policy that someone wrote blindfolded many years ago.
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