Can Libertarians support limited liability for corporate shareholders with a clear conscience? Limited liability attached to corporate ownership is a wholly distinct form of property right granted by the state. As a result, many Libertarians view it as an “artificial” or “unnatural” right, casting the corporate form of organization as an institutionalized rent-seeker’s bonanza. However, limited liability can arise via private contract even without formal recognition of a separate form of property by the state, and there are strong arguments in favor of limited liability as an economic catalyst. Moreover, certain legal dimensions of property ownership are more consistent with limited liability than are often admitted by detractors. Preserving limited liability for corporate shareholders now may be more important than ever, given the way that exposure to tort actions has expanded over time.
The following articles illuminate some arguments in favor of limited liability:
Megan McArdle: Be Glad That Corporate Liability Is Limited.
From a Libertarian/Austrian perspective: Corporations and Limited Liability for Torts.