Who should form a limited by guarantee company?



I would like to form a new company, but I am not sure about the process. To be honest, I didn’t even know there were different company types until relatively recently. The most popular type appears to be a limited by shares company, but it sounds like some of the same legal protections are given to owners of limited by guarantee companies. It’s got me wondering: who should form a limited by guarantee company? What type of business venture is it right for?


Toby Hayward



Most people set up companies limited by guarantee for non-profit or charitable purposes. It is by far the best legal structure for these types of ventures because surplus income is used to further the aims of the business, rather than being given to the company owners (guarantors) for their own personal use.

Limited by shares companies, on the other hand, are set up by people who want to keep business profits as a source of personal income. This is the most popular legal structure because the vast majority of companies are run for commercial profit-making purposes, but it is not a suitable structure for nonprofits or charities.

2 years ago

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