Types of company

1. Private Companies

There is no statutory minimum or maximum capital for a private company. It is now possible to set up a company with only one member and for that member to have only one share, but this is exceptional. There must be at least two people involved in running a company. The company's articles may require that there are at least two directors, but if this is not the case and there is just one director, a separate person must be appointed secretary.

Private Limited companies can be registered with varying Memorandum and Articles of Association so that a company can be used as:

  • An ordinary trading company with power to engage in any legal commercial activity.
  • A Flat Management company with specially written objects that enable it to carry on the business of the management of shared domestic or commercial property.
  • A company limited by guarantee with specially written objects that establishes it for charitable purposes and not to make any distribution to members. Many of these types of company exist and a good example are the many Enterprise Trusts whose objects are generally constructed so that they offer support to the self employed. These companies do not have any share capital, rather there exists a guarantee that members will contribute a fixed amount (usually £1) should the company go into liquidation.

2. Public Companies

The key difference between public and private companies is that a public company may offer to sell its shares to the public. It may be quoted on the Stock Exchange or the Alternative Investment Market, but does not have to be. Out of 13,000 public companies registered in Great Britain only 2,100 are quoted on the London Stock Exchange.

Before it can start business or borrow money, a public company must satisfy Companies House that at least £50,000 worth of shares have been issued and that each share has been paid up to at least a quarter of its face value. It will then receive an authorisation to commence business and to borrow. A public company must have at least two directors and a suitably qualified secretary. It will have a name ending in Public Limited Company or PLC.

3. Unlimited Companies

While all public companies and most private companies have limited liability, it is possible to set up an unlimited company although the incidence of this is extremely rare. This would not have Limited at the end of its name and would not normally be required to produce accounts for public inspection. If an unlimited company were unable to pay its creditors, the members of the company would be liable for the full amount of any debt.

4. Limited Liability Partnerships

In order for business partners to have the benefit of limited liability a partnership can be incorporated. This enables the problems of joint and several liability that apply to all members of an ordinary partnership to be avoided. There are no shares in an LLP and arrangements for taxing the income of individual partners are the same as for an ordinary partnership.

A partnership deed will be required setting out the 'constitution of the partnership and on request we can supply a copy FREE of charge

A Companies Constitution

Every company has a Memorandum of Association (except for an LLP), which determines its name, where its registered office may be situated and what it may do (its objects).

The rules for the conduct of the company's internal affairs are contained in its Articles of Association. There is a standard form for the articles (in the case of a company limited by shares known as Table A), but this may be modified.

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