This will be accomplished by setting out the main features of the limited liability company and the partnership. Once these features are set out, comparisons relative to the advantages of a registered limited liability company over a partnership can be explained and evaluated.
The main legal benefits of a registered limited liability company is the existence of perpetual life, its separate legal personality from its incorporators and the limited liability of shareholders and other classes of owners and investors.2 Under UK company law, a company has limited liability status when the shareholders’ liability is limited to the amount that is “payable for the shares”.3 A registered company simply refers to the fact that the company is registered with the companies’ registrar and is a typical function of UK company law formalities.4
The concept of limited liability was first introduced in UK law under the Limited Liability Act 1855 conferring upon shareholders what was characterized as “conditional limited liability”.5 Liability was conditional upon providing “a minimal capital” which necessitated adding the word limited to the company’s name signaling the fact of liability.6 In 1856 the UK introduced the Joint Stock Companies Act which officially made limited liability unconditional. The Companies Act 1862 reflected the concept of limited liability and the era of limited liability was deeply entrenched in the UK’s corporate culture.7
Essentially, what limited liability means is that the shareholders of the company many not be held liable for the company’s debts “beyond the amount that he has chosen to invest”.8 In other words, if the company is unable to discharge its debts the shareholders cannot be personally liable for the shortfall.
A limited liability company also enjoys the status of legal personality which