Limited

Limited is a term that is often used in the context of business and law. It refers to a type of company that is incorporated, meaning it has a separate legal identity from its owners. This is in contrast to other types of businesses such as sole proprietorships and partnerships, where the owners are personally liable for the company's debts.

In a limited company, the liability of the members or subscribers of the company is limited to what they have invested or guaranteed to the company. Limited companies may be limited by shares or by guarantee. The former may be further divided into public companies and private companies.

Types of Limited Companies

Limited by Shares

A company limited by shares is a company that has shareholders, and the liability of the shareholders to creditors of the company is limited to the capital originally invested, i.e., the nominal value of the shares and any premium paid in return for the issue of the shares by the company. A shareholder's personal assets are thereby protected in the event of the company's insolvency, but money invested in the company will be lost.

Limited by Guarantee

A company limited by guarantee is a company that has members who are guarantors instead of shareholders. The guarantors give an undertaking to contribute a nominal amount towards the winding up of the company in the event of a shortfall upon cessation of business. It cannot distribute its profits to its members but must retain them within the company or use them for some other purpose.

Advantages of Limited Companies

Limited companies have certain advantages. For instance, they have a separate legal identity, can own property, incur debt, sue and be sued. The owners of a limited company are not personally liable for the company's debts. The company continues to exist even if the owners change.

Disadvantages of Limited Companies

However, there are also disadvantages to limited companies. For example, they are more complex to set up and run, have more regulations to comply with, and need to pay corporation tax. They also need to make their financial information public.

See Also

• Corporation
• Sole Proprietorship
• Partnership
• Shareholder
• Guarantor

References

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