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Company Types & Structures

Understand the differences between limited companies, LLPs, and other UK business structures

Choosing the right type of company is crucial as it determines the legal and operational framework for your business. Here's a quick guide to the most common types of companies:

 

1) Limited by Shares Company

A company limited by shares is the most common form of company used for running a business in the UK. Owners have limited liability, meaning their personal assets are protected in case the business cannot pay its debts. This form of company is ideal for profit-driven businesses, as any profits can be shared among the shareholders.

 

Key Features:

  • Shareholders’ liability is limited to the value of their shares.
  • Separate legal entity, meaning the company is responsible for its own liabilities.
  • Ideal for small to large for-profit enterprises.
 

2) Limited Liability Partnership (LLP)

An LLP blends elements of partnerships and corporations, offering flexibility and limited liability to its partners. This is advantageous for professionals like lawyers or accountants who require flexibility and seek to reduce personal liability.

 

Key Features:

  • Partners are not personally responsible for business debts beyond their investment.
  • Operates similarly to a traditional partnership in management and profit sharing.
  • Particularly favored by professional groups for its tax and operational flexibility.
 

3) Limited by Guarantee Company

This structure is preferred by non-profit organizations where the company is intended to operate without profit distribution among members. Profits are reinvested into the company to help promote the non-profit's objectives.

 

Key Features:

  • No shareholders, only guarantors with limited liability.
  • Suitable for clubs, community projects, and charities.
  • Profits are not distributed as dividends but are reinvested back into the company.

 

Alternative Company Structures

You can also explore specialised company types. Below are some of the most common ones we see:

Special Purpose Vehicles (SPVs)

SPVs are designed for managing risks associated with specific assets, such as property holdings. They are commonly used in buy-to-let operations to manage properties efficiently under one entity. To form an SPV, choose from any of our limited by shares packages above and enter the following SIC Codes:

  • 68100 – Buying and selling of own real estate.
  • 68209 – Other letting and operating of own or leased real estate.
  • 68310 – Real estate agencies.
  • 68320 – Management of real estate on a fee or contract basis.
 

Community Interest Company (CIC)

A CIC is a type of Limited Company in the UK created for businesses that want to use their profits and assets for the public good. These companies are aimed at benefiting the community rather than private individuals.

Since forming a CIC can be complex, involving stringent regulatory compliances and additional documentation, we recommend getting professional assistance. For detailed steps and legal advice, consult a specialist CIC formation agent or visit the official UK Government page on setting up a social enterprise.
 

Charities 

A charity company can be established using specific methods, one of which is through a Limited by Guarantee structure. With our Limited by Guarantee package, you have the option to submit your custom articles for approval by the Charity Commission. After the company is established, it must be registered as a legal entity with the Charity Commission. We do not provide advice on the selection of the company structure. For further details, please contact the Charity Commission directly.