In a corporation, shareholders are financially liable only for the amount invested.

• A. Personal liability unlimited
• B. No liability at all
• C. Liability limited to amount invested
• D. Liability for all contracts

Answer: (C)

In a corporation, owners enjoy limited liability. The company is a separate legal entity from its shareholders, so the risk to an investor is confined to the amount they invested. Shareholders do not personally owe the corporation’s debts or contracts under normal circumstances, which is why personal assets are generally protected.

Exceptions exist, such as when a shareholder personally guarantees a loan, or the corporate veil is pierced due to fraud, undercapitalization, or commingling of personal and corporate assets. In those cases, personal liability can arise.

This is why the statement is correct: liability is limited to the amount invested. The other notions would imply personal exposure beyond the invested capital, no liability at all, or liability for contracts, which do not apply to shareholders in a standard corporate structure.