Limited Liability and the Invention of Survivable Failure
Limited liability is one of the least romantic inventions behind modern capitalism: a legal boundary that made commercial failure survivable. Capitalism prefers to narrate itself through courage—founders who dare, investors who recognise the future and markets that reward the leap. Most people do not accept serious uncertainty because they are heroic. They accept it when the consequences have edges. A society that exposes every owner to every possible business debt will still produce enterprise, but much of it will remain small, cautious and dependent upon family wealth, intimate partnerships or powerful patrons. A failed shop, workshop, publisher or software company would not merely consume the capital placed into the venture. It could pursue the owner into the home, savings and income needed to begin again. Limited liability does not abolish risk. It partitions it. In the ordinary company limited by shares, the business remains responsible for its debts, while shareholders ordi...