Advantages and Disadvantages of a Limited Company

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A limited company is a legal entity in its own right.

You are not personally liable for the company’s debts as long as you have not traded fraudulently or you have not given personal guarantees for bank borrowings or to suppliers.

Click here for information on forming a limited company.

 

What are the benefits of a limited liability company?

The key benefits of a limited liability company are:

  • A shareholder cannot be held personally liable for the debts of a company
  • Creditors can only look for payment from the company. This can only be settled out of the assets of the company. Generally, the personal assets of the shareholders and the directors are protected
  • A limited company is a separate legal entity. This means that both the directors and the company have separate rights and responsibilities
  • Operating as a limited company often gives customers and suppliers a greater sense of confidence in a business
  • Once your company name is registered as a limited company, the name is legally protected and it cannot be used by anyone else
  • Often, larger organisations will not deal with non-limited businesses
  • The liability of the shareholder of a limited company is limited to the amount unpaid on any shares issued to them

 

Disadvantages of a limited liability company include:

  • The filing of sometimes sensitive commercial financial information with the Companies Registration Office which is openly available
  • Business losses may not be set against personal income
  • Possibility of further taxation on capital gains if appreciating assets are withdrawn from the business at a later date.
  • The need for accounts to comply with Companies Acts together with auditing and accounting standards

If you are interested in forming a limited company click here, please contact mariaf@parfreymurphy.ie to discuss further.

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  1. Pingback: Sole Trader v Limited Company | Parfrey Murphy Accountants Cork

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