Limited company

Also called Ltd, Private limited company, Company

A separate legal person that can own things, owe money and be sued in its own right, distinct from the people who own it.

What it means

A limited company is registered at Companies House and exists in law separately from its shareholders and directors. It has its own assets, its own debts and its own tax.

Shareholders own it. Directors run it. In a small company they are usually the same people, and the law still treats the two roles differently.

Why it matters

Limited liability is the headline benefit — but it is narrower than most owners assume, and disappears entirely once you sign a personal guarantee.

The costs are real: annual accounts and a confirmation statement filed publicly, corporation tax returns, and directors' duties that carry personal consequences.

What it looks like in practice

Incorporation costs a small fee online and takes a day. That is the easy part.

Get the shareholding right at the start. Splitting shares equally with a co-founder because it feels fair, without a shareholders' agreement, is the most common structural mistake made by new companies and the hardest to unwind.

Note that some of your information is published — registered office, directors, persons with significant control.

What to watch out for

Treating the company's money as yours. It is not, and the mechanism for taking it out matters: see dividend and director's loan account.

Directors' duties apply from day one, including the duty to consider creditors' interests once the company is in financial difficulty — see wrongful trading.

Where to get proper advice

Companies House for the mechanics. An accountant for the tax comparison, and a solicitor for the shareholders' agreement — not a template if there is more than one of you.