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


I need advice. A few mates and I have been in charge of a running club in Cumbria for about two years. It’s grown by leaps and bounds, and now has almost a hundred members! Now, we’re keen to try and use that membership to give back to the community. We want to form an actual, official group to do fundraising and stage local running events. The problem is, none of us have got a clue how to do it! Trying to get started, it looks like there are a few different company types you could form, and that we either want to go with a company limited by shares or a company limited by guarantee. Not sure which, though. Can anybody tell me what the differences between these two company types actually are?



The main differences between companies limited by shares and companies limited by guarantee are the liability of the owners, share capital and the allocation of profits.

Companies limited by shares:

  • Set up with one or more shares
  • Owned by people called shareholders.
  • Financial liability of shareholders is limited to the value of the shares they take in the company.
  • Normally set up by commercial businesses that intend to make a profit.
  • Shareholders usually receive the profits.

Companies limited by guarantee:

  • No share capital or shareholders.
  • Owned by people called guarantors.
  • Financial liability of guarantors is limited to what they guarantee to the company.
  • Normally set up by nonprofits, membership organisations and charities.
  • Guarantors do not usually receive profits.
  • Profits are used to support the nonprofit or charitable mission of the organisation.
a year ago

under the company limited by guarantee, the object is not for trading or commerce but in the event of the company limited by shares, the object is to carry on a business for profit and to divide that profit among the members.

6 months ago

Can we change a company status(Type) from limited by share to limited by guarantee?

10 months ago

Nope, you need to register a new company. Rapid Formations offer limited by guarantee company formation services https://www.rapidformations.co.uk/package/limited-by-guarantee-formation/

10 months ago

Can we change from a CIC Lydia by shares to ltd by guarantee

7 months ago

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