A limited company is a separate legal entity from its owners. This guide explains limited liability, the extra admin involved, and how owners take money out.
Published July 2026 · Updated July 2026
A limited company is a business set up as its own legal entity, separate from its owners. It can own assets, owe money and enter contracts in its own name.
Because the company is separate, its debts are its own. Owners' personal assets are generally protected, their liability is limited to the money they put in. That protection is the main reason people incorporate.
In return there is more responsibility: annual accounts filed with Companies House, a Corporation Tax return to HMRC, and a confirmation statement each year. Records must meet UK GAAP (usually FRS 102 or FRS 105).
Owners are usually directors and shareholders. They typically take a modest salary plus dividends from profits, which can be more tax efficient than salary alone, though rules and thresholds change.
It can be, depending on profit levels and how you take money out, but it comes with more admin and cost. The right choice depends on your circumstances, so take advice.
A shareholder owns part of the company; a director runs it. In small companies the same person is often both.
Yes, companies file accounts at Companies House that are publicly viewable, though small companies can file simplified versions.
Source: GOV.UK ↗. This glossary is written for small business owners, so definitions are simplified. Tax rates and thresholds reflect 2026/27 UK rules and change over time. Berified does not provide accounting, tax or legal advice; always check the source or a qualified adviser.