A ltd company operates as a distinct legal person and acts as a separate legal entity from its owners. As a separate legal entity, it can enter into contracts in its name, shielding its shareholders from personal responsibility for such agreements. The only exemption to this rule is if you, as director of the ltd company, provide a bank or other creditor with a personal guarantee that the Company will repay its debt. In such a case, you become personally responsible for repaying the debt if the Company cannot do so.

A ltd company is an attractive legal entity because it provides some level of shareholder protection. If your company runs into financial hardship and needs to shut down operations, the creditors cannot go after you personally to collect any debts. Ltd companies have a more formal and established appearance than sole proprietorships or partnerships. The responsibility of shareholders can be better managed than that of partners or sole proprietors since there is often only one major shareholder in personal Ltd Companies. 

As in a limited company, individuals also have tax benefits over sole proprietorships and partnerships, including exemption from National Insurance payments and the potential for more concessions in tax dividends, both of which result in reduced tax payments.