When most people refer to a ‘company’, they usually mean a private limited company which has shareholders. However, there are several other types of company which all serve a different purpose. The types of limited company are the company limited by guarantee, a private company limited by shares, public limited companies and private unlimited company.
Private Company, Limited by Shares
The vast majority of companies in the UK are private companies, limited by shares. A limited company has ‘share capital’, which is owned by its shareholders. The liability of each shareholder is limited to any unpaid amount owing on their shares. Since the implementation of the Companies Act 2006, you can be the sole director of a limited company, and the office of a company secretary is an optional one.
Private Company, Limited by Guarantee
Private companies, limited by guarantee, on the other hand, have members who act as guarantors, rather than shareholders. The only liability members have is the amount they guaranteed to the company in the event that it was wound up. This type of structure is commonly used by charities, voluntary groups, and other non-profit organisations.
Members of this type of company benefit from limited liability – in most cases liability is limited to a mere £1.
One person can set up this type of company, and as with the most commonly formed company type, the office of a company secretary is an optional post.
Public Limited Companies
Public Limited Companies (PLCs) are larger organisations. Unlike the other types of limited company, they may offer their shares to members of the public, and be listed on the stock exchange. A PLC must have two directors or more, and the company secretary must be qualified.
In many cases, standard limited companies are converted into PLCs at a later date, when the business need arises.
PLCs are subject to much more rigorous accounting scrutiny than their smaller counterparts.
Private Unlimited Company
A Private Unlimited Company is the final type of company, and not commonly used. These entities may or may not have a share capital, and there is no limited to the liability of their members.
Other types of Business Structure
Alongside the incorporation route, the majority of small business people operate as sole traders or set up partnerships if they want to carry on a trade with other people.
These types of structure are simple to set up and don’t have the same levels of administration and accountability as limited companies, however, sole traders are liable for any debts their businesses incur.
The Limited Liability Partnership (LLP) route is often used by professional businesses such as law firms, where members want the combine the benefits of self-employment with the protection that incorporation affords.
To be sure that you select the right type of business structure for you, we would always recommend talking to an accountant first.
More on setting up a limited company and types of franchises.
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