What is the difference between types of companies?

For anyone starting up their own company, it can be daunting to figure out what type of company you would like to create. When it comes to types of companies, it matters because they do not all function the same way. It depends on the type of business on how it functions. There are different types of companies that can be formed in the UK, below is a brief summary of each company.

Types of company

Public limited company

Public limited company is known as a ‘public company’, anyone in the public can own this business and buy the shares. Before the business can become a public limited company they must have a share capital of at least £50,000. It is also a legal requirement for at least two directors to be appointed.

Private company limited by guarantee

This is a type of company that is normally non-profit or for charity. The business does not have shareholders. The members of the board who are known as guarantors are responsible for the business and debts. A company limited by guarantee must have at least one director and one member (though this can be the same person). One of the main reasons for forming a company limited by guarantee is that it protects the founders from personal liability for the company debts.

Private unlimited company

Unlike other limited companies, private unlimited companies don’t have to submit annual return or any financial statements. Private unlimited company is quite rare. This type of company don’t have shareholders that’s responsible for the investment. Every shareholder would be responsible for the business debt if the company would go into administration and collapse.

Limited liability partnership

Limited liability partnership is neither a partnership nor a company. An LLP does not have shareholders or directors and is taxed like a partnership. They are not legally treated as partnerships in the UK. There are certain requirements for a company to become LLP, for example some or all the partners have to have liabilities. This means they are only responsible for their own misconduct or negligence. The difference of Limited Liability Company and other limited companies, is that the partners can directly manage the business.

Community Interest Company

Community Interest Company was established in 2004 by companies act. Its main objective is to help the society rather than making a profit. The partners of this organisation are limited by shares or guarantee. To improve their community services they sometimes use the profit to make it better. Most of the time community interest company are mistaken to be a charity company. They are more commercial based compared to charities.

Choosing the right type of company

When forming a business it’s not easy to decide which type of company you would like to form. There are certain factors that should be taken into mind before making a decision. These factors are:

  • Flexibility
  • Complexity
  • Liability
  • Taxes
  • Control
  • Capital investment

How we can help

Want to know more? Here at Carrington Blake, we will give you the right advice that is most suitable for you. Speak to us today and grab a quote.

To find out more about the types of company, contact us today on 0207 537 6628 or leave us an email on sales@carringtonblakeaccountancy.com. If you have a question or would like further information, why not chat to us now.

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