Limited Liability
/ˈlɪmɪtɪd laɪəˈbɪlɪti/
Limited liability is a legal protection that restricts a business owner's personal financial responsibility for company debts and obligations to only the amount they've invested in the business.
Limited liability is a legal protection that restricts a business owner's personal financial responsibility for company debts and obligations to only the amount they've invested in the business.
Limited liability creates a legal barrier between your personal assets (like your home, car, and savings) and your business debts.
If your company fails or faces legal claims, creditors generally cannot pursue your personal wealth beyond what you've put into the business.
When you incorporate a limited company, the business becomes a separate legal entity from you personally.
This means the company owns its assets, incurs its own debts, and can enter contracts independently.
Your personal exposure is typically capped at your initial investment and any unpaid share capital.
Limited liability isn't absolute protection.
Directors can become personally liable if they continue trading whilst insolvent, commit fraud, breach fiduciary duties, or provide personal guarantees for company debts.
Courts may also "pierce the corporate veil" in exceptional circumstances involving serious misconduct.
Limited liability encourages entrepreneurship by reducing personal financial risk when starting a business.
It allows founders to pursue opportunities and raise investment without risking their entire personal wealth, making it easier to take calculated business risks and attract external funding.
Whilst limited liability offers protection, it comes with additional responsibilities including statutory filing requirements, potential corporation tax obligations, and more complex accounting procedures.
You'll also need to register with the relevant company registry and maintain proper corporate records.
Operating through a limited liability structure often enhances credibility with suppliers, customers, and potential investors.
The "Ltd" designation signals that you're running a formal business entity, which can improve trust and make it easier to secure business relationships and contracts.
