What Types Of Limited Company Are Available?

Now that you have decided to incorporate a company, there are a number of types to choose from. All companies have separate legal personalities from their members and have to be registered at Companies House, regardless of what sort they are.

Limited companies fall into two categories – private and public.

Public companies

As their name suggests, public companies can go to the general public for investment. But the ability to do that means that they have a higher level of legal requirements to meet than private companies (see below).

A public company must:

• have at least £50,000 of issued share capital although this can be issued in other currencies, as long as the total is equivalent to £50,000;
• have at least two shareholders – so one person cannot simply invest the £50,000 to meet the requirement above;
• have at least two directors. It is possible for directors to be companies themselves, but for public limited companies at least one of the directors must be an individual. In practice, shareholders would expect more than one individual to be on the board of directors; and
• have a competent company secretary. The company secretary makes sure that the public company fulfils its administrative responsibilities at Companies House.

Being a public company does not in itself mean that its shares can be traded on a stock exchange. If a company wants to list on a particular stock exchange, the company must meet the requirements of its listing rules.

Private companies limited by shares

This is the most common business structure for start –ups, because the registration and other regulatory requirements are minimal. There are just over one million active private limited companies on the Register, and many more dormant ones.

Private companies cannot offer their shares for sale to the public. However, private companies limited by shares can equity investment from family, friends, employees and venture capitalists.

Private companies limited by shares must:

• have at least one director, and whilst they do not have to have a company secretary most private companies have one. This can be one of the directors acting in a different capacity;
• have at least one shareholder;
• meet filing requirements at Companies House.

As this is by far the most commonly formed company this is the type of company that you can form using our website SetUpaCompany.co.uk.

Private companies limited by guarantee

The liability of members of these companies is limited by the guarantee that they give, which is typically for a nominal amount of just a few pounds. Such companies are unlikely to attract any kind of investment, and are typically social enterprises or charities. This structure is commonly used where the members are embarking on a specific task together rather than on a commercial enterprise. For example, academy schools are often companies limited by guarantee.

Other types of limited company

You can also incorporate private unlimited companies where members' liabilities are not limited. However, the circumstances in which you would do this would be few and far between.

Finally, Community Interest Companies (CICs) are a specialist type of corporate body similar to limited companies, but with the added restriction that their assets can only be used for the good of the community.