What is Limited Liability?

One of the most searched terms on Google relating to forming a limited company is “what is limited liability?” Limited Liability is the cornerstone of protecting company shareholders in Ireland. It can be defined as follows:

Currently with a limited company in Ireland the shares in the company are owned by its shareholders. If the company is a limited liability company, the shareholders’ liability, should the company fail, is limited to the amount, if any, remaining unpaid on the shares held by them. A company is a separate legal entity and, therefore, is separate and distinct from those who run it. Only the company can be sued for its obligations and can sue to enforce its rights.

The advantages of forming a Limited company are as follows:
1. Members’ liability is limited as per the definition above.

2. The company has a legal existence separate from management and its members.

3. The company’s name is protected – Formation of a limited company protects its name from use by another limited company in Ireland.

4. Changing Directors and or the company Secretary is relatively straight forward.

5. Ireland’s Corporate Tax Rate of 12.5% is low.

6. New companies set up in Ireland benefit of 0% corporation tax in the first 2 years as new entities.

7. There are more flexible borrowing powers available.

8. It is easier to incorporate new investment and allocate new shareholders in a limited company.

9. Employees can acquire shares in the company.

10. The company can continue to operate despite the death, resignation or bankruptcy of management and or its members.

11. Perception of a limited company is different in business to a Sole Trader.

12. As a sole trader or a partnership, the personal assets are at risk if there are claims being taken against the business.

13. The company can raise finance by the issue of shares.

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