The main benefit is the limitation of liability. As a company has limited liability all debts etc rest with the company and do not pass on to individuals involved in the company. So in most cases you can ‘only lose what you put in’ i.e. you shareholding. However there are certain situations in which the officers of the company can become personally liable either to the company itself or to third parties, I will not deal with such situations in this note but you should be aware of their existence.
Other benefits include the legal identity of the company i.e. it can sue, be sued and enter into contracts etc. Shares can be bought and sold, the company has no “life” so it cannot die (unlike those running it), money can be raised through borrowing, floating charges etc.
There are also benefits for potential investors. The accounts of a company are published so it makes it easy for would be investors to find out about the company, as well as the accounts the public can also access other records at Companies House that relate to the company.
As with any business medium there are though downsides for example: a great deal of regulation, red-tape, publicising accounts etc.