What does the term "limited liabilities" imply for limited companies?

The term "limited liabilities" signifies that the financial responsibility of the shareholders in a limited company is confined to the amount they have invested in the company. This means that if the company faces financial difficulties or goes into liquidation, the personal assets of the shareholders are protected, and they are only liable to lose the amount they contributed in shares. This legal structure encourages investment, as potential investors have the assurance that they won't be held personally accountable for the company's debts beyond their initial investment.

The other choices do not accurately reflect the meaning of limited liabilities. For instance, linking risk to personal holdings does not apply since the principle of limited liability specifically aims to protect those personal assets. Similarly, the idea that funds invested in the company are secured does not align with the reality that investments in companies, especially limited companies, can still result in losses if the company fails. Overall, the concept of limited liabilities is about ensuring that an investor's risk is capped, fostering a safer environment for investing in business.