Why would I form a company limited by guarantee?

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Greetings! I’m shopping around for business ideas. Until recently, I didn’t even know there were different company types in the UK (I’m from America originally), and so I’m trying to get a grasp for each type before I file for incorporation with Companies House. I’ve landed on limited by guarantee companies, and don’t really get it. Why would someone start a limited by guarantee company? What are the benefits? Much appreciated.

Answers

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Normally you would set up a limited by guarantee company for a non-profit venture or charity. It is also perfectly suitable company structure for running a for-profit business, too, but a limited by shares company is better for this purpose.

The reason that the limited by guarantee structure is best for nonprofits is because it doesn’t have any shares or shareholders so you don’t have to distribute dividends (profits) to members. All income generated by the business is simply reinvested in the company to achieve its non-profit purpose.

You can find a thorough description of limited by guarantee companies here.

a year ago
 

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