people dream of being the owner of their own limited company, but what does
that entail? In this article we will provide you with a general overview of limited
Let’s start by defining
what exactly a limited company is. A limited company is a private company in which the owner or owners
are responsible by law for the company’s debts to the extent of the amount of
capital they invested in the company.
companies are owned by an individual, people and/or other companies. The
individuals who own a limited company based on shares are referred to as
shareholders. This is because the shareholders own a percentage of the company.
The individual or individuals who own a limited company based on guarantee are
called ‘guarantors’ as they give a portion of money to the company.
How many persons can have ownership?
limited company can range from having one owner to multiple owners. There is no
set number. This, therefore, means that the company can be owned by one person
or it can be collectively owned by many persons or cooperate bodies. Get it?!
The owner’s sole responsibility
owner or owners’ responsibility in a limited company is to make top-of-the-line
decisions such as appointing and removing a director, assigning roles to
directors, making adjustments to the article of association and altering the
company’s share and capital. The owner may also be responsible for registering the limited company.
Are the directors of limited
companies the owners?
very common misunderstanding associated with limited companies is that the
director is the owner, but that is not the case or rather should not be the
case. The director is responsible for the effective running of the company. His
or her primary roles entails the following:
§ Assist the company to soar
to higher heights with his or her skills
§ Makes decisions for the
company while using independent judgment
§ Manage the company on
behalf of the subscribers or shareholders
§ Exercise and demonstrate
diligence, care and skills
In a nutshell, directors are
responsible for the daily decision making in a limited company. So, then, if
the director is not or should not be the owner then who is? Hmmm.
guessed it! The shareholder or shareholders are the owners of limited
What are the financial liabilities of
the owners of a limited company?
owner’s responsibility is to make sure that the piggy bank never runs dry. In
other words, they make sure that money is contributed to the business up to
their liability limits. The liability of shareholders is restricted to the
nominal value of the shares that they purchased; which is normally £1 per share.
The guarantor’s liability is always limited to their financial guarantees. The
guarantors or shareholders are required to contribute an agreed sum of money
upon joining the limited company or whenever the company requests money to pay
Now that we
have discussed in detail what a limited company is, let us zoom in on some of
the benefits of having such a company.
Taxation: One of the main benefits of a
limited company is the fact that you are likely to pay lesser taxes as opposed
to a sole trader company.
Protection: You are given added
protection if and when things go wrong. You are therefore given the reassurance
of limited liability.
Professional Image: Having a limited company
for some business can add value to your company’s professional image. Let’s say
a big company wants to make a huge financial deal with you, they may be more
assured and feel safer to do business with a limited company than a sole trader
There you have it! Are you ready to
start your business? Are you still unsure as to whether you should start a sole
trader or a limited company? I bet you have gotten your answers.