April 13th, 2018

Registered Companies in the UK: guidance for limited companies, partnerships and other company types

A sole trader (self-employed person) wishing to become incorporated has several corporate structures to choose from, such as a private limited company or as a Limited Liability Partnership (LLP). The majority of companies formed in the UK are Private Companies Limited by Shares.

We put together this guide on the different types of companies we offer, to help you make a more informed decision that fits you and your company.

Private Companies Limited by Shares

The majority of trading companies are private companies limited by shares. There are over two million such live companies registered at Companies House.

A private company limited by shares must have the word ‘Limited’ or ‘Ltd’ at the end of its name. The main advantage of trading through a limited company is to have limited liability. Many private companies are very small, there’s no minimum capital requirement for a private company and it is commonly less than £100.

Approximately 90% of private companies are small or medium sized companies which means that they can file shortened accounts at Companies House, rather than full accounts.

This type of company needs a minimum of one director and one shareholder, but this can be the same person.

For more advice on Private Limited Companies click here.

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Companies Limited by Guarantee

A Company Limited by Guarantee, is widely used by charities, clubs, community enterprises and some co-operatives, a company does not have to be non-profit making to use this structure.

There are no shares and so no shareholders, but such a company does have members, who meet and control the company through general meetings. The directors are often referred to as a management committee or council of management, etc. to law are still company directors under company law and subject to all the rules that affect other directors.

A company limited by guarantee confers limited liability as effectively as a company limited by shares. Articles state that members must guarantee to pay its debts, but only up to a fixed amount each. Usually that sum is £1, and no member can be liable for more than the subscribed amount if the company fails.

For more details on Companies Limited by Guarantee click here.

Community Interest Companies (CICs)

Community Interest Companies are a relatively new type of company (from 2005) which can only be registered for objects which are for the good for the community.

Apart from the requirement of having objects that benefit that benefit the community, the two main features that distinguish CICs from ‘normal’ companies are the asset lock and the Community Interest Statement and Report.

Under the asset lock provisions, the assets and profits must be permanently retained within the CIC, and used solely for community benefit, or transferred to another organisation which itself has an asset lock, such as a charity, or another CIC.

With every application to form a CIC, a community interest statement must be lodged, with the usual documents, when seeking company registration. The statement must be signed by all directors, describing how the activities the CIC will undertake and describe how these benefit the community.

For more details on Community Interest Companies click here.

Charitable Companies

The 'chartable company' is a form under which charities can now be set up and to which existing charitable associations or trusts can convert. In either case, a company limited by guarantee is set up with special charitable articles and is registered both at Companies House (as a company) and with the Charity Commission as a charity in its own right.

Unlike an unincorporated association or trust, a charitable company, as an incorporated body, can own property, will be liable for its own debts, and transact business with third parties. As a limited company, the charity will have directors and members, the directors will also be trustees of the charity for the purposes of the Charities Act.

The great advantage to those running the charity is that as a limited company, only the charity is liable for its debts and the people behind it are in most circumstances fully protected by limited liability. Charitable companies must take returns and submit accounts on an annual basis to both Companies House and the Charity Commission, and must also comply with both charity and company law.

For more details on Charitable Companies click here.

Limited Liability Partnerships

A Limited Liability Partnership is a comparatively new type of business made available in 2001.

This type of company is a fusion between a private company limited by shares and a partnership. An LLP is a separate legal entity conferring full limited liability on its members, there must be at least two members, but there is no upper limit.

An LLP is subject to the same rules as a private limited company for the registration of accounts at Companies House, and the auditing of its accounts.

The LLP is treated for tax purposes as an ordinary partnership, each partner is liable to income tax for its share of the profits, and to Capital Gains Tax in respect of any gains made on the disposal of assets by the LLP.

There are no statutory provisions for general meetings, capital contributions, profit distributions, etc. as with a common law partnership, these are matters for the LLP agreement.

There’s no statutory requirement to register a written LLP agreement, but such an agreement is essential in practice.

For more details on Limited Liability Partnerships click here.

A small percentage of companies are public companies, they must have a name ending in the words 'public limited company' or 'PLC'. This type of company is appropriate for larger businesses where shares are intended to be made available to the general public.

The majority of public companies are not set up as such but are converted from private ones.

Public companies must have a minimum share capital of £50,000 of which at least one-quarter plus any share premium must be paid up before the company can obtain its trading certificate from Companies House and start trading or borrow money. This is the only type of company listed on the Stock Exchange, or other public markets such as the Alternative Investment Market (AIM).

Public companies are subject to more stringent legal requirements than private companies on a wide range of matters, but especially in relation to share capital, directors and accounts.

For more details on Public Limited Companies (PLC) click here.

At Stanley Davis, our experts can help you tailor your company to your requirements and ensure the right structure from the start. If you require any further advice from our experts please contact us on 020 7554 2222.

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