If you wish to trade as a business there are various business structures you can choose from such as setting up as a sole trader or registering as a limited company. If you choose not to register a limited company then you are personally liable for the entire debt of your company. One of the many benefits of registering your business as a limited company is that there will be a limit to your liability.  Unlike a sole trader, all personal finances will be kept separate. As a sole trader your personal assets or savings will be venerable should the company fall into debt or claims are made against you.

A limited company is a separate entity and the company owners and directors will not be liable for the debts that the company may incur. A limited company will be registered at Companies House and put on the Registrar of Companies.

Because the company is a separate legal entity to its owners and shareholders then any debts of the company will be for the company to bear. Any liability that that company directors or shareholders will be responsible for will be strictly limited to the value of their shares.

The main reason to form a company is for limited liability. As the company is a separate legal entity to its owners (members or shareholders), the debts of the company are not the debts of the individuals. If it is a company limited by guarantee then their liability will be limited to the amount that was agreed by members as the value of their guarantee. The benefit of having a limited company is that should the company be unsuccessful and is forced to close then the shareholders are only liable for what they agreed to contribute to the company by the way of shares or guarantee.

Information concerning your registered office address and details of shareholders are available to the public. Financial accounts need to be filed each year which are also available to the public. The articles of association which outline the constitution by which the company is governed will also be on display. You can out find more about the Articles of Association and Company Formation documents by visiting the link.

Types of Limited Company

There are various limited companies available which will again depend on the nature of your business. These include the following;


  • A Limited Company is responsible for all financial liability
  • Company directors and shareholders have limited liability
  • The personal liability of company directors and shareholders will be strictly limited to the value of their shares.
  • A Limited company will pay corporation tax on all profits
  • Limited Company directors are taxed as employees
  • Full statutory accounts and a company tax return must be submitted to HMRC on a annual basis
  • Details of registered office address and shareholders are available to the public.