What does personal liability mean in relation to a Private Limited Company?
Personal liability means that the directors and/or shareholders are personally liable for any debts of the company. This might be trading losses, damages awarded in court etc. Self-employed people (ie sole traders or partners) always have personal liability. No matter how big their business, if something goes wrong they are liable for all the debts. So they could lose there personal assets such as house as well as the business. In a ltd company the directors have no financial stake and are merely officers or employees of the company. As such they normally have no more liability than any other employee. The “limited” in the name refers to the limited liability of the shareholders, who own the company. Their liability is limited what they initially paid for their shares. So once they have paid for their shares they will not be liable for any losses of the company. In practise the same people are often the directors and the shareholders, but they have 2 “hats” and the two roles are separa
