What does it mean for a private limited company to have limited liability?

In simple terms, from a business perspective- as the word indicates it is limited to your investment in your business.

So, if there are any personal assets - these cannot be used to satisfy business debts. This is a big advantage and is a layer of protection for the business owners.

However, there are few exceptions. You need to ensure your personal transactions are kept separate from business & you should have well-maintained books /tax records. If your personal and business books are not kept separate, then your limited liability may be challenged during legal proceedings etc.

If there are any personal transactions that were included in your business, you need to post necessary journal entries to reclassify and correct it on a regular basis. 

**Our response to a question asked on quora


Posted In: Company Formation

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