Can a stockholder in a corporation be held personally liable for the corporation's debts?

A stockholder, or shareholder, in a corporation is generally not personally liable for the corporation's debts due to the principle of limited liability, which is a fundamental characteristic of corporations. This means that the corporation is viewed as a separate legal entity from its owners. As a result, shareholders are only financially responsible for the amount they invested in the corporation, protecting their personal assets from any debts or liabilities that the corporation incurs.

Incorporating this limited liability feature encourages investment in corporations because shareholders can participate in the company's profits without risking personal financial ruin beyond their investment. This structure is essential for fostering economic growth and encouraging entrepreneurship, as it allows individuals to engage in business ventures with a degree of financial safety.

While there are certain circumstances where personal liability can arise, such as when a shareholder personally guarantees a corporation’s debt or engages in wrongful conduct, these situations are exceptions rather than the norm. Thus, the general rule remains that shareholders are not held personally liable for corporate debts, making the assertion that they are not personally liable the correct understanding of shareholder liability.