What is a key characteristic of limited liability regarding an owner's financial responsibility?

A key characteristic of limited liability is that an owner's liability is limited to their investment in the business. This means that if the business incurs debts or faces legal claims, the owner's personal financial assets are protected, and they are only responsible for the amount they invested in the company. This feature encourages investment in businesses, particularly in forms such as limited companies, as it reduces the financial risk for individuals involved.

In contrast, unlimited liability could lead to the owner being personally responsible for all business debts, which poses a significant risk to their personal finances. Likewise, options suggesting that liability depends on business performance or that personal assets are always at risk misrepresent the nature of limited liability. In a limited liability structure, personal assets are safeguarded from the business's obligations, making participation in business ventures less daunting for investors.