Limited liability
Limited liability for shareholders for "contracts" entered by the corporation is not controversial because this could and probably would be agreed to by both parties to the contract. However, limited liability for shareholders for "torts" (or harms not agreed to in advance) is controversial because of concerns that such limited liability could lead to excessive risk taking by companies and more negative externalities (i.e., more harm to third parties) than would be produced in the absence of limited liability. According to one estimate, negative corporate externalities on an annual basis are equal to between 5 and 20 percent of U.S. GDP.