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What is a limited company?

A private limited company (LTD) is “an individual legal entity which is separate from that of its officers”(technical speak for the people who run it). A limited company has its own assets and liabilities, profits and losses. The liabilities are limited to the company – in other words, the owners are protected from financial liability should the company encounter any difficulty. This is different from that of a sole trader or partnership, where the assets and liabilities of the business belong to the individuals.

For example if you are a sole trader window cleaner you’ll more than likely own your ladders, the same goes if you were an IT freelancer you will own the hardware. However if these two individuals traded through their own limited company, the company will more than likely own the assets i.e. ladders and hardware.

Ownership of a limited company is through issuing shares, in small owner managed businesses the shares are usually owned entirely by the Directors. Limited companies must also submit annual accounts to Companies House each year which are made available to the general public (an accountant will usually do this for you.

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