1. What Is a Limited Company?
A limited company is a type of business structure in the UK that exists as a separate legal entity from its owners. This means:
- The company is responsible for its own debts
- Owners (called shareholders) have limited liability
- The company can own assets, enter contracts, and be sued in its own name
It’s one of the most common structures for growing and protecting a business.
2. Types of Limited Companies in the UK
- Private Limited Company (Ltd): The most common. Owned by private individuals and cannot offer shares to the public.
- Public Limited Company (PLC): Can sell shares to the public on the stock market. Requires a minimum share capital of £50,000.
- Limited by Guarantee: Often used by non-profits. No shareholders—members guarantee a small sum if the company winds up.
- Limited Liability Partnership (LLP): A hybrid for professional firms like solicitors or accountants.
3. Key Features of a Limited Company
- Separate legal identity
- Limited liability for shareholders
- Must be registered with Companies House
- Directors manage the business; shareholders own it
- Must file annual accounts and confirmation statements
- Pays Corporation Tax on profits
4. Limited Liability Explained
The biggest benefit of a limited company is limited liability:
- If the company fails or is sued, personal assets of shareholders are protected
- Shareholders only risk the money they’ve invested in the company
This offers more security than sole trading or partnerships.
5. Setting Up a Limited Company
To start a limited company in the UK:
- Choose a company name
- Register with Companies House (online or via an agent)
- Appoint at least one director
- Issue shares and identify shareholders
- Set up a business bank account
- Register for Corporation Tax with HMRC
You’ll also need to maintain company records and submit annual accounts.
6. Pros of a Limited Company
- Limited personal risk
- More tax-efficient at certain income levels
- Credibility with clients, investors, and lenders
- Ownership flexibility via shares
- Easier to raise capital
7. Cons of a Limited Company
- More administration and reporting
- Public records—company details are visible online
- Need to comply with strict legal duties as a director
- Accountancy costs are typically higher
For some, the formal structure outweighs the simplicity of sole trading.
8. Limited Company vs Sole Trader
| Feature | Limited Company | Sole Trader |
|---|---|---|
| Legal Identity | Separate entity | Individual |
| Liability | Limited | Unlimited |
| Taxes | Corporation Tax | Income Tax |
| Setup Cost | Low | None |
| Paperwork | More | Less |
| Profit Retention | Via dividends/salary | Directly earned |
Choose based on your income level, risk tolerance, and long-term goals.
Frequently Asked Questions
1. What does “limited” mean in a company name?
It means shareholders’ liability is limited to their investment in the company.
2. Is a limited company a legal person?
Yes. It can own property, be sued, and pay taxes in its own name.
3. Can one person form a limited company?
Yes. You can be the sole director and shareholder.
4. Do I need an accountant for a limited company?
It’s highly recommended due to complex reporting and tax filing.
5. Can I take all the profits from my limited company?
No. You must pay yourself via salary and/or dividends, subject to taxes.
6. How do I close a limited company?
Apply for voluntary strike-off through Companies House or liquidate it formally.
Conclusion
The limited company meaning in the UK goes beyond just a legal label—it’s a structure offering protection, credibility, and long-term flexibility for business owners. Whether you’re just starting out or planning to grow, understanding how limited companies work helps you make smarter business decisions in 2025.