Types of limited companies

Posted on 22nd February 2024 by Streets -  Corporate Governance & Regulation


Image to represent Types of limited companies

A limited company is a company ‘limited by shares’ or ‘limited by guarantee’.

Limited by shares

This is the most common limited company structure. A limited by shares company is a separate legal entity owned by its shareholders and managed by its directors. In smaller limited companies, shareholders and directors are the same persons. Directors are employed by their company; they are not self-employed. Limited companies are required to pay Corporation Tax on their profits, not Income Tax. 

Limited by shares companies are usually businesses that make a profit. This means the company:

  • is legally separate from the people who run it;
  • has separate finances from its shareholders personal ones;
  • has shares and shareholders; and
  • can keep any profits it makes after paying tax.

Limited by guarantee

In essence, a company limited by guarantee is a limited company with no shareholders. Instead, the persons who set up the company – its members - guarantee to pay a fixed amount into the company if required on the winding up of the company. Usually, these guarantees are for small amounts.

This type of company is typically used by not for profit organisations and charities rather than trading companies.

This means a limited by guarantee company:

  • is legally separate from the people who run it;
  • has separate finances from your personal ones;
  • has guarantors and a ‘guaranteed amount’; and
  • invests profits it makes back into the company. Profits are not distributed to the guarantors.

No Advice

The content produced and presented by Streets is for general guidance and informational purposes only. It should not be construed as legal, tax, investment, financial or other advice. Furthermore, it should not be considered a recommendation or an offer to sell, or a solicitation of any offer to buy any securities or other form of financial asset. The information provided by Streets is of a general nature and is not specific for any individual or entity. Appropriate and tailored advice or independent research should be obtained before making any such decisions. Streets does not accept any liability for any loss or damage which is incurred from you acting or not acting as a result of obtaining Streets' visual or audible content.

Information

The content used by Streets has been obtained from or is based on sources that we believe to be accurate and reliable. Although reasonable care has been taken in gathering the necessary information, we cannot guarantee the accuracy or completeness of any information we publish and we accept no liability for any errors or omissions in material. You should always seek specific advice prior to making any investment, legal or tax decisions.


Expert insight and news straight
to your inbox

Related Articles


Changing a company’s accounting year end

There are special rules which limit the ability to change your company’s accounting year end date. A company’s year end date is also known as its ‘accounting reference date’ and is historically set by reference to the date the company was incorporated. Under certain circumstances it is possible ...


Register of Overseas Entities

The Register of Overseas Entities came into force in the UK on 1 August 2022. The register is held by Companies House and requires overseas entities that own land or property in the UK to declare their beneficial owners and / or managing officers. HMRC has recently ...


Company confirmation statement changes

As well as filing accounts with Companies House, there is an important requirement to check that the information Companies House has about your company is correct every year. This is facilitated by the filing of an annual company confirmation statement. Companies House can prosecute a company and its ...


You might also be interested in...