Limited Liability Company

Limited Liability Company

Limited Liability Company

The companies in which liabilities of the shareholders are limited is known as Limited Liability Company. It is a corporate structure whereby the members of the company cannot be held personally liable for the company’s debts or liabilities. It is a legal form of business organization with daily activities like a partnership but with limited liability similar to a corporation. No members of those companies are required to bear extra liability out of the face value of their certain shares. In this viewpoint the limited liability companies are also classified into two as

i) company limited by shares and

ii) company limited by guarantees.

Company limited by guarantee: A company limited by guarantee is an alternative type of corporation used primarily for non-profit organizations that require the legal personality. A guarantee company does not usually have a share capital, instead of having members who act as guarantors instead of shareholders, as happens with other types of companies. The guarantors are given an undertaking to contribute a nominal amount (typically very small) towards the winding up oil the winding up of the company in the event of a shortfall upon a succession of the business. It is often believed that it cannot distribute its profits to its members but this is not actually true. A company limited by guarantee that distributes its profits to members would not be eligible for charitable status.

Company Limited by Shares: Where the members of the companies are only liable for that range of liability that is contained by the face value of their purchased shares. Maximum Joint Stock Companies fall in these types. The word ‘limited’ is being used at the end of these companies.

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