A limited company is a business that has been incorporated with Companies House to exist as a distinct legal entity that is separate from its owners. A company can be limited by shares or limited by guarantee. The personal finances of the owners are protected by ‘limited liability’, which means they are not responsible for paying for business debts above and beyond what they have invested in the company or guaranteed to pay.
The most popular type of company is a private company limited by shares. They are owned by shareholders and set up with a view to generate profits that can be distributed amongst the owners. The liability of shareholders is limited to the value of their shares.
A private company limited by guarantee is a popular business structure for non-profit organisations and charities. They are owned by guarantors - there are no shareholders or shares. The liability of guarantors is limited to the amount they ‘guarantee’ to pay toward business debts.