A limited company is a separate legal entity. The owners are shareholders, and its directors make decisions on behalf of the company. As a separate entity it has sole responsibility for its debts. Its liabilities are limited to the paid-up share capital, therefore the company is said to have "limited liability".
Advantages of a Limited Company
- Limited liability - in general, shareholders are only liable to lose the share capital they subscribe.
- Pension contributions can be made at the Company's expense.
- Raising finance can be less difficult.
- There can be many owners of the business.
Disadvantages of a Limited Company
- Limited liability may be neutralized as lenders, in practice may seek personal guarantees.
- Legislative requirements may be costly and time consuming.
- The need to prepare and file audited accounts with the Companies Registration Office.
- There are surcharges on undistributed investment incomes.