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UK Business Entity Types – Limited Liability Company

Limited Liability Companies are the most common form of business registration in the UK. Those which are unlimited are uncommon and rare by comparison.

Features Of Limited Liability Companies

The main feature of limited liability companies are that they afford the owners (shareholders) and the persons who run it (directors) protection of their personal wealth. The trade of a company, any debts that it may incur or any other dealings it may enter into are deemed to be its own.

If the company borrows money and then defaults on the loan, only the assets of the company can be pursued. The assets of the directors and shareholders are largely safe and are not seen as belonging to the company. They have limited liability protection.

If a partnership, on the other hand were to borrow money and then default on the loan, the partners themselves are seen as liable. Their other business and personal assets can be used to repay the debt. In extreme cases, personal items such as houses, cars, jewellery and so on may have to be sold in order to repay the businesses debts.

In theory, the only exposure faced by the company shareholders is any amount of unpaid monies owing for their shares. This is called unpaid share capital.