What types of company are there?
The following are the various types of registered company. Apart from these,
a business may be set up as a sole trader (self-employed person), as a partnership
or as a Limited Liability Partnership (LLP). Incorporation
Services Limited provides an expert service for all your company formation
and company law requirements.
Private companies limited by shares
Public limited companies (PLCs)
Property management companies
Companies Limited by guarantee
Unlimited companies
Limited Liability Partnerships (LLPs)
Community Interest Companies (CICs)
Private companies limited by shares
The vast majority of trading companies are private companies limited by shares.
There are over one million such companies registered at Companies House. Such
a company must have the word 'Limited' or 'Ltd' at the end of its name.
Many private companies are very small. There is no minimum capital requirement in respect of a private limited company and it is commonly less than £100. Approximately 90% of private companies are small or medium sized companies which means that they can file modified (i.e. simplified) accounts at Companies House, rather than full accounts.
A private company may not offer shares or debentures to the public CA 985, sec81, only a public company (PLC) may do so.
Public Limited Companies (PLC)
A small proportion of companies are public companies. Such a company must have
a name ending in the words 'public limited company' or 'PLC'. This type of company
is appropriate for larger businesses where shares are intended to be available
to the general public. Most public companies are not set up as such but are
converted from private ones.
A public company must have a minimum authorised share capital of £50,000, of which at least one-quarter plus any share premium must be paid up before the company starts trading: CA 1985, sec11, sec118, sec101.
This is the only type of company which may raise capital by offering securities (shares or debentures) to the public. This is usually done by obtaining a listing on the Stock Exchange.
Public companies are subject to more stringent legal requirements than private companies on a wide range of matters, but especially in relation to share capital, directors and accounts.
Property Management Companies
A property management company is a type of private limited company. Such a company
will be set up in order to hold an interest in property which is being divided
into units, each unit being owned separately. A typical example is a large house
which has been divided into a number of flats, each flat being owned by one
or two people. There will usually be a need for somebody to own the building
as a whole, including common parts such as stairways, gardens, access paths
etc. Unless there is a landlord retaining this interest, the simplest legal
device is for a company to be set up to own the freehold of the property, and
for each owner of a flat to have an interest in the company.
Some property management companies will do no more than hold the title to property and so can be considered as dormant companies under the Companies Acts, allowing pro forma dormant company accounts to be registered at Companies House. This helps keep administration costs to a minimum and is useful where where the property is small with little or no routine maintenance which can be arranged between the owners of the flats without involving the company.
Companies Limited by Guarantee
A company limited by guarantee is private company, very like a private company
limited by shares, but it does not have a share capital. It is widely used for
charities, clubs, community enterprises and some co-operatives. The vast majority
of such companies are non-profit distributing, but they do not have to be.
A company limited by guarantee is registered at Companies House, has a set of memorandum and articles, directors, etc and is subject to the requirements of the Companies Acts (except those relating to shares). There are no shares and so no shareholders, but such a company does have members, who meet and control the company through general meetings. The directors are often called a management committee or council of management, etc but in law are still company directors and subject to all the rules that affect other directors.
A company limited by guarantee confers limited liability as effectively as a company limited by shares. The memorandum states that the members of the company guarantee to pay its debts, but only up to a fixed amount each. Usually that sum is £1, and no member can be liable for more than that amount if the company fails.
Unlimited companies
Many people refer to a sole trader's business or a partnership as an unlimited
company, but such businesses are not in fact companies. It is possible to register
at Companies House a private company which is unlimited, that is the members
accept complete liability for the company's debts. If the company needs money
to pay its debts a call can be made on each of the shareholders to contribute
a fixed amount on each share held by them.
An unlimited company has all the other features of a private company limited
by shares. It is registered at Companies House, has members, directors, memorandum
and articles, etc. Its one major advantage is that it is not required to register
annual accounts at Companies House.
Limited Liability Partnerships (LLPs)
This is a new type of business structure became available in 2001. It is
a separate legal entity conferring full limited liability on its members. It
is created by registration at Companies House. There must be at least two members,
but there is no upper limit. An LLP is subject to the same rules as a private
limited company for the registration of accounts at Companies House, and the
auditing of its accounts. The same exemptions from these requirements are available.
The Act does not impose a structure for the management of an LLP. There are
no statutory provisions for general meetings, directors, company secretary,
share allotments, etc. As with the existing partnership, these are matters for
the partnership agreement (if any) There is no statutory requirement to register
(or even to have) a written partnership agreement, but such an agreement is
essential in practice.The LLP is treated for tax purposes as an ordinary partnership:
i.e. each partner is liable to income tax under Schedule D for his or her share
of the profits, and to Capital Gains Tax in respect of any gains made on the
disposal of assets by the LLP. Click here for more
details on LLPs
Community Interest Companies (CICs)
Community Interest Companies are a new type of company (from 2005) which
can only be registered for objects which are for the good of the community.
The Companies (Audit, Investigations and Community Enterprise) Act 2004 ('the
Act'), and The Community Interest Company Regulations 2005 made under the Act,
establish the legislative framework for CICs.
The two main features that distinguish CICs from 'normal' companies are the
asset lock and the Community Interest Statement and Report. Under the asset
lock provisions, the assets and profits must be permanently retained within
the CIC, and used solely for community benefit, or transferred to another organisation
which itself has an asset lock, such as a charity, or another CIC. With every
application to form a CIC, a Community Interest Statement must be lodged, with
the usual documents, seeking company registration. This Community Interest Statement,
signed by all the directors, must describe the company's objects and certify
that the company is formed to serve the community rather than for private profit.
CICs can be limited by shares or by guarantee.
Conversion from one type to another A private company limited
by shares can be converted into a public company and vice versa, or to an unlimited
company. An unlimited company can be converted to a private company limited
by shares. A company limited by guarantee cannot be converted to a company limited
by shares or vice versa.
Existing companies can convert themselves into CICs but such conversions require
the approval of the CIC Regulator. Where the company converting to a CIC is
a charity, the permission of the Charity Commission is needed for a change of
name.
Incorporation Services Limited provides an expert service
for all your company formation and company law requirements.
Related topics
|
