Limited Company

• shareholders who are the registered owners of the company's issued share capital;
• directors who are individuals charged with running the business of thecompany and ensuring it complies with the relevant regulatory and administrative requirements; and
• it's employees who are contracted to work for the company.
  

One of the most important characteristics of a limited company is the limited liability status of its shareholders. As the company is a legal entity in its own right it is the company that holds its own assets and incurs liabilities. The company is responsible for those liabilities and the shareholder is not obliged to meet those liabilities personally. As such the most a shareholder can ever lose is the amount paid for his shareholding.

A limited company is governed by its constitution and by the relevant Statute and Common Law. These set down the rules by which the company must operate.

The fact that a company is capable of owning its own assets and incurring its own liabilities means that (unlike a sole trader or partnership) the business can effectively be sold by simply transferring ownership of shares from the existing shareholders to the purchaser and all assets and liabilities will automatically pass with the company. This allows for what is known as "perpetual succession" in that a shareholder can either sell his shares in the company or have his shares pass to the beneficiaries under his Will upon his death. This makes a limited company a much more convenient vehicle for estate planning purposes.

Unlike sole traders and partnerships a limited company is subject to the corporation tax regime and as such pays corporation tax rather than income tax.

The links on this page examine some of the issues surrounding limited liability companies in more detail.

For more information please contact Simon Morris.