What is the difference between a limited by shares company and a limited by guarantee company?

In the UK you can form different types of companies. Most customers will form normal limited by shares companies. However, you can also register companies that are limited by guarantee that are suitable for charities, clubs, associations and other not for businesses that are not for profit. You can also register Limited Liability Partnerships (LLPs).

'Private Company Limited by Shares'

The most common type of company is a private company limited by shares, commonly referred to as a 'Limited company'. This type of company is used for private businesses that intend to make a profit which would be distributed to the owners (shareholders). If you are forming a company to earn money for you and any other owners then this is probably the type of company you intend to form.

'Private Company Limited by Guarantee’

This type of company is only suitable for ‘not for profit’ or charitable types of company. It is typically registered by people wanting to start a charity, club, association, or other business that will re-invest profits for the good of the business not the owners. This company has no shares so it cannot distribute profit to shareholders. The company is often set up with a list of 'objects' which dictate how any profit is used. For example, 'to support and maintain youth facilities within a certain area'. Once the company limited by guarantee has been formed you can apply to be a registered charity through the Charity Commission.

'Private Company Limited by Guarantee exempt under section 60'

This type of company is exactly the same as the above description for 'Private Company Limited by Guarantee' but is exempt from using the word 'Limited' in the company name. This type of company still benefits from limited liability but simply does not call itself limited. Only really suitable for charitable companies or those with not for profit distribution clauses in the articles of association.  

Please note Companies House processing times are an estimate only and not guaranteed.

Simple Formations is a trading name of Small Firms Services Limited. We have been trading since 1998 and are one of the UK's longest standing Company Formation Agents

We accept card payment by American Express, Mastercard and Visa

We accept Visa, Mastercard and American Express

Small Firms Services Ltd Union House 111 New Union Street Coventry, CV1 2NT