All limited companies need to register as a limited company. Companies become registered after delivering certain documents to the Registrar of Companies. These include:

• the Memorandum of Association, which is the company’s constitution
• the Articles of Association, which set out the rules and regulations governing the internal management of the company
• Application to register a company (Form IN01)

The owners of a company are its shareholders. A shareholder’s liability is limited to the unpaid nominal value of the shares they hold. However, the company’s liability isn’t limited – it must pay its debts as long as it has the funds to do so.

Because it has a separate legal identity, a limited company is regarded as a ‘legal person’ and can enter into contracts in its own name. We’ll see the relevance of this later when we look at how protection policies are written.

The profits of limited companies are charged at progressive rates of corporation tax. The shareholders of a company may receive a proportion of the company’s profits by way of dividends, which are paid out of the company’s profits after tax.