Liability is the potential for loss. It can be defined as a company's legal obligation to another party. Specifically, liability refers to the obligation to pay compensation for damages, losses or harm caused by an individual or organization to another party.
As a business owner, you have many types of liabilities that you may have to deal with in your daily business operations. In some cases, you may need to obtain insurance coverage for certain types of liabilities in order to protect your assets and interests. For example, if you are selling goods online through your business without any type of payment processing system in place, then you will likely be liable for any fraudulent activity that occurs on your site.