A Guide to Setting up a Company Limited by Guarantee

  • Price: £3.60
  • Published: July 2016
  • Type: Business Information Factsheet
  • Format: PDF

The company limited by guarantee legal structure is typically used by not-for-profit organisations (NFPOs), social or community enterprises and projects, charities and clubs and membership associations that require corporate status. It protects the people who are running the organisation or project from personal liability for any debts that may arise upon winding up because it has a separate legal identity from its members.

A company limited by guarantee is very similar to a private company limited by shares (usually known as a limited company). However, it differs in that it cannot raise funds through the sale of an interest in the company because, under the Companies Act 2006 (the Companies Act), it cannot have share capital so there cannot be any shareholders.

Under the Companies Act, private companies limited by guarantee must first be registered or incorporated with Companies House and then registered with HM Revenue & Customs (HMRC) for corporation tax before starting to trade. Companies limited by guarantee are also subject to a variety of rules requiring them to report annually to both Companies House and HMRC.

This factsheet explains the ownership and management structure of companies limited by guarantee, the issues to be aware of when choosing a business name, and company naming restrictions. It also explains the steps to take to incorporate and register a company, and the process for buying an off-the-shelf company and registering for corporation tax.

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