Limited Company is a general form of incorporation that limits the amount of liability undertaken by the company’s shareholders. It is one of the most popular business models for all sizes of organizations. This is due to the many benefits it provides over other types of legal business structures. It refers to a company in which the liability of each shareholder is limited to the face value of his share. It is a private company whose owners are legally responsible for its debts only to the extent of the amount of capital they invested. It is a type of business structure whereby a company is considered a legally distinct body.
A limited company (LC) is a general term for a type of business organization wherein owners’ assets and income are separate and distinct from the company’s assets and income—known as limited liability. It refers to a legal structure that ensures that the liability of company members or subscribers is limited to their stake in the company by way of investments or commitments. Even if a company has only one individual involved with it and that person is the only shareholder and the only director, the company is still a separate legal entity.
Types of a limited company
- Private limited companies cannot offer shares to the general public. In the UK, this is one of the most common set-ups for small businesses.
- Public limited companies (PLCs) can raise capital by offering shares to the general public.
If you choose to run your business as a limited company, the business will:
- Be legally distinct from the people who run it.
- Keep finances separate from the owner’s personal finances.
- Your personal assets are not at risk should your business fail.
- Be able to own assets and keep any profits it makes after tax.
- You have complete control of your financial affairs without having to risk them being tied up in a third-party administrator or umbrella company.
- Most suppliers and customers have greater confidence in limited companies than other company structures.
Limited Company Benefits –
- Its structure provides a firewall between the finances of the company and its owners.
- It is allowed to own assets and retain any profits made after-tax.
- It can enter into contracts on its own.
Limited liability is one of the main advantages of the limited company set-up as shareholders are only legally responsible to the extent of their original investment, and can only lose the capital they initially put into the business.