Business, Legal & Accounting Glossary
A limited company is a registered company (see: Registered company) in which the members have only limited liability for debts incurred by the company. Although it is possible for a registered company to be of unlimited liability (see: Unlimited company) this is relatively unusual. In most companies, the primary purpose of registration is to achieve limited liability status. This limitation of liability has a price, of course, in the form of taxation.
There are, in theory, two ways in which the limited liability is signified: limitation by shares (see: Limited by shares), and limitation by guarantee (see: Limited by guarantee). The latter is now mostly defunct (but see commonhold association).
A limited company in the United Kingdom is a corporation whose liability is limited by law. There are three main types of limited companies which are set up by the Memorandum of Association & Articles of Association:
Similar to Pty. Ltd.
This type of company does not have share capital but is guaranteed by its “members”, who agree to pay a fixed amount in the event of the company’s liquidation. Frequently charities incorporate using this form of limited liability. Another interesting example is the Financial Services Authority.
Public limited companies can be publicly traded on a stock exchange (similar to the U.S. Corporation and the German AG).
A shareholder in a limited company, in the event of its becoming insolvent (equivalent to bankruptcy in the US), would be liable to contribute the amount remaining unpaid on the shares (usually zero, as most shares are issued fully paid). ‘Paid’ here relates to the amount paid to the company for the shares on first issue, and not to be confused with amounts paid by one shareholder to another to transfer ownership of shares between them. A shareholder is thus afforded limited liability.
A limited company can be registered in England and Wales, Scotland, Northern Ireland or Australia. The registration of companies in Great Britain (England, Scotland and Wales) is done through Companies House. The registration of companies in Northern Ireland is done through the Department of Enterprise, Trade and Investment.
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This glossary post was last updated: 24th April, 2020 | 2 Views.