What is meant by 'limited by guarantee'?


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”?



‘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.

2 years ago

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