Limited Company Definition
So what is the Limited Company Definition.
The main reason for a limited company is to give limited financial liability to an enterprise.
It separates the debt, and the liability, of the company from an individual, or individuals, who operate via the company.
If a person is a self-employed individual then they may have to pay up if sued.
They may also have the liability if they make heavy losses.
Company Owns the Debt
However, if they operate via a limited company then it is the company that has the debt and not the individual.
If a company has heavy debts or other liabilities then it can just be shut down.
The debts disappear along with the company.
No debt attaches to the individual who operated via the company.
That includes the tax debts.
They can then start again from scratch.
Government Encourages Limited Companies
So, why does the Government allow this?
It doesn’t just allow this, it actually encourages it.
It is to encourage enterpreneurs.
Most entrepreneurs don’t succeed at their first attempt.
However, if they were loaded down by debts from their failures they wouldn’t be able to start new businesses.
The learn from each failure.
In America they say that entrepreneurs have, on average, three business failures first before they succeed.
Paying Your Business Debts
Gone are the days when it was the workhouse for you if you couldn’t pay your business debts and thank goodness for that too.
The biggest growth companies are usually the small ones.
The Government wants to encourage these small companies to grow bigger so that they will employ more people and both they and the individuals employed pay more tax.
So, they give them certain tax benefits to help them succeed.
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