What Type of Company Am I?

14 September 2011 DueDil Team

In the UK, there are many company registrations available, all with its advantages and dis-advantages. Which one you choose depends on what type of company you are.

Firstly, you need to ask yourself, what are your aims? Do you want to make a profit or are your activities not for profit?

If it’s the latter, your best option is to register as a private company limited by guarantee. This form of registration has limited liability, which means you are protected to the extent to which you have invested in the company.

Lenders can’t take your dog if business is going bad (unless your dog is part of the company!) The company does not comprise of shareholders but guarantors of the business.

These guarantors agree to pay a nominal fee on the winding up of a company. The advantage of this for charities is that profits are not distributed to shareholders via dividends but instead is retained by the company.

The equivalent of Directors is called “Trustees” in a private company limited by guarantee.

Examples of organisations that choose this form of registration include clubs, students’ unions, sports associations, social enterprises, NGOs and Charities. If you are a commercial enterprise with the aim of making profit, then there are 3 options you can go for:

  • Private company limited by shares,
  • Private unlimited company
  • Public limited company (plc)

By far the most popular option is the Private company limited by shares (ltd) or commonly known as a Private limited company. These companies are owned by no more than 50 shareholders (family and friends), whose liability is limited by shares owned.

Separate legal entities are created, allowing for properties to be owned by said company, companies can employ people, act as directors or secretaries of other companies, sue and be sued.

The main advantages of being a Private limited company

  • A reduced tax bill
  • Profits can be distributed through dividends (this keeps your shareholders happy!)
  • It is easier to raise capital
  • You have more credibility in the market place and you appear more professional than Joe Blogg Co.

Fun Fact: The largest private limited company in the UK is Alliance Boots with sales of £23.3 billion and profit of £1.4 billion!

Private unlimited liability companies are similar to Private limited companies, but can also have non-share versions. This sort of registration is favourable when there is a low risk of insolvency or the company has enough funds and does not need to approach lenders for money such as high street banks. Larger companies tend to register as Public limited companies (plc).

Anyone can buy shares in a Plc. and there can be unlimited shareholders. These shares can be listed on a stock exchange or stay unlisted. Unlisted companies are generally smaller and not suitable for listing. The obvious advantage of this is the ability to raise finance from a wide range of sources through any member of the general public. It is also easier to obtain funds from a bank.

Disadvantages are however 1. You can fall victim to a hostile takeover 2. Anyone with enough money can buy a controlling interest in your company (As White Goodman from Dodgeball found out). If any one person owns more than 30% they are required to launch a takeover bid.

To become a Plc. the company must have

Minimum share capital of £50000,
Minimum of two directors,
Its name must contain “plc.” or “private limited company”
A trading certificate from the Companies House
So there, a quick guide to which type of company you should be registering!