Why is limited liability more beneficial to businesses?
William Jenkins
Updated on January 08, 2026
Minimising personal liability The biggest benefit of forming your own company is limited liability protection. Simply put, should your company run into trouble, your personal assets will be secure. This is because a limited company is treated as a separate legal entity; a legal ‘person’ in its own right.
Why would you make your company limited?
A limited company offers limited liability to the business owner. This is one of the biggest reasons why entrepreneurs opt for this business structure. Having limited liability means that if a business incurs debts, your personal assets and finances will be protected in the eyes of the law.
What benefit is it for a company to have its own legal identity?
Separate legal entity Corporations have the same rights as a real person, including owning property, getting loans, and entering into contracts.
Why is limited liability important for a company?
Limited liability makes it easier for companies to raise finances because people can buy shares of the business and become shareholders.
How does a limited liability company raise money?
A limited liability company generally has the same two sources of raising funds as a corporation: equity and debt. Raising funds through the equity route means selling ownership stakes of the business.
How can a private limited company raise finance?
Debentures are an excellent tool to raise finance by way of debt however in case of convertible debentures, the private company should ensure that at no point in time the number of members exceeds 200. A company can accept unsecured loans from a director and their relatives with or without interest.
How is a limited liability company taxed?
This means that the members of a limited liability company can avoid double taxation on business income which is the case in a corporation. In the case of corporations, the earnings of a company are first taxed with the corporate tax rate and then in the hands of the shareholders as personal income tax.
