What is limited liability?

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Hello, I’ve got a quick query about limited companies. I have been told by my financial advisor that I want to form a limited by guarantee company because it will provide me with limited liability as the company’s sole director. I’m not 100% sure what that means. What is limited liability, and why would I want it?

Ta

David Baldwin

Answers

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Limited liability is a form of financial protection that is only available through incorporated structures like limited companies. It prevents the owner(s) of a company from being held personally and fully accountable for business debts and lawsuits - company owners are not legally required to pay anything toward business liabilities apart from the value of their financial guarantees (or the value of their shares, if the company is limited by shares).

A limited company is an individual ‘person’ in the eyes of the law. This is why they are responsible for their own debts and why their owners enjoy limited liability. Without this protection, your own money and personal assets would be at risk if you were unable to pay your creditors or your business was sued.

a year ago
 

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