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Businesses may be limited companies for a number of reasons - it may look more 'professional', it may help if you need to raise external finance, and it may be more tax efficient than other business structures.
Under the limited company structure, your company and personal finances are kept separate, unlike the sole trader structure.
Limited companies are subject to corporation tax on their profits. If your limited company is going to turnover £83,000 or more per year, you must register for Value Added Tax (VAT).
A limited company is owned by its shareholders. Limited companies are no longer required by law to have a company secretary. They can now operate with just one director and shareholder.
If things go wrong and a limited company fails, its directors and shareholders have 'limited liability' in that their personal assets cannot be touched. For sole traders, their personal liability is unlimited.
A Private Limited Company cannot offer shares for sale on the stock market, whereas a Public Limited Company can.
All limited companies must be registered at Companies House. All limited companies should submit an 'Annual Return' to Companies House each year as well as their annual accounts.