What is meant by 'limited by guarantee'?

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Everybody is telling me that I should form a limited by guarantee company, and I’m prepared to take their word for it. That being said, I like to know what I’m getting into before I hop into the deep end, and I hate not knowing my business vocabulary. What exactly is meant by “limited by guarantee”?

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‘Limited by guarantee’ simply means that the financial liability of the company is limited to the amount guaranteed by its guarantors (owners). A guarantee is what you, as the owner of the business, promise to give the company if it runs out of money and cannot meet its financial obligations.

It’s basically a form of financial protection that means you won’t lose your personal assets if the business fails. Limited liability is one of the reasons why limited companies are so popular.

a year ago
 

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