What is a limited company?

A limited company is one of the most common business structures in the UK, and for many founders moving beyond the early stages of self-employment it becomes the structure of choice. Despite its widespread use, many people have only a partial understanding of what makes a limited company legally distinct from other business structures and what that distinction means in practice.

A limited company is a separate legal entity from the people who own and run it. This means the company can enter contracts, own assets, incur debts, and be sued in its own name — and the personal liability of its shareholders is generally limited to the value of their shares. Limited companies are registered with Companies House and must file annual accounts and confirmation statements. Directors are responsible for managing the company and have legal duties that do not apply to sole traders.

Forming a limited company involves more administrative obligations than operating as a sole trader — including statutory filing requirements, directors' responsibilities, and separate company accounting. For many founders, the liability protection and other practical advantages make these obligations worthwhile. Our guide to limited company registration walks through the formation process step by step and explains the ongoing responsibilities for UK company directors.