how a limited company works
as noted in a limited company the assets and debts of the company are separate from those of the shareholders as a result should the company experience financial distress because of normal business activity the personal assets of shareholders will not be at risk of being seized by creditors ownership in the limited company can be easily transferred and many of these companies have been passed down through generations unlike a public company in which anyone can buy shares membership in a limited company is governed by a company s rules and law a limited company can be limited by shares or limited by guarantee when limited by shares a company is owned by one or more shareholders and managed by at least one director in a limited by guarantee arrangement a company is owned by one or more guarantors and managed by at least one director the primary benefit of a limited company is the separation of assets and income from the corporation and the owners and investors through limited liability this means that if a company goes bust shareholders can only lose as much as their original investment and no more creditors or other stakeholders cannot claim owners personal assets or income because of limited liability investors are more eager to risk capital since their losses are limited in that sense limited company benefitsfiling as a limited company comes with a number of benefits they include for the privilege limited companies in the u k must pay a variety of taxes such as a value added tax vat and capital gains tax and must contribute to national insurance limited companies in the u k receive favorable tax treatment once their income reaches a certain threshold the corporate tax rate is a flat rate of 19 1 by comparison unincorporated businesses such as sole proprietorships and traditional partnerships do not afford full limits on liability for owners because there is no legal distinction between the business and its owners if such a business were to become insolvent its owners would be responsible for its debts limited company variationslimited company structures are codified in many nations though the regulations governing them can differ widely from one nation to the next for example in the united kingdom there are private limited companies and public limited companies private limited companies are not permitted to offer shares to the public they are however the most popular structures for a small business public limited companies plcs may offer shares to the public to raise capital those shares may trade on a stock exchange once a total share value threshold is met at least gbp 50 000 2 such a structure is widely employed by larger companies in the united states a limited company is more commonly known as a corporation corp or as incorporated inc some states permit the use of ltd limited after a company name such a designation depends on filing the correct paperwork just adding the suffix to a company name does not provide any liability protection limited companies in the u s are required to file corporate taxes annually with regulators limited liability companies llcs and limited companies have different structures many countries differentiate between public and private limited companies for example in germany the aktiengesellschaft ag designation is for public limited companies that can sell shares to the public while gmbh is for private limited companies that cannot issue shares 