Choosing a company structure is one of the first important decisions when starting an organisation. The right answer depends on what you will do, who will own or control it, how profits should be used and how much personal liability the members are prepared to accept.
For most trading businesses, a private company limited by shares is the familiar starting point. It is not the only option, however. An LLP may suit a professional partnership, a guarantee company may work better for a club or association, and a CIC is designed for organisations trading for community benefit.
This guide compares the six formation routes supported by The Company Shop. It is a practical overview rather than legal, tax or accounting advice.
The six formation routes at a glance
| Structure | Usually suits | Ownership or membership | Liability |
|---|---|---|---|
| Private limited company (Ltd) | Most trading businesses | Shareholders own it; directors run it | Normally limited to any amount unpaid on shares |
| Limited liability partnership (LLP) | Professional and owner-managed partnerships | Members, including at least two designated members | Members are generally not personally liable for debts the LLP cannot pay |
| Company limited by guarantee | Clubs, associations and many non-profit organisations | Guarantor members rather than shareholders | Limited to the guaranteed amount |
| Community interest company (CIC) | Businesses operating primarily for community benefit | Members or shareholders, depending on the form chosen | Limited, with an additional statutory asset lock |
| Property management company | Developments with shared areas or responsibilities | Usually property owners or residents | Normally limited by shares or guarantee |
| Unlimited company | Unusual situations requiring a specialist structure | Members or shareholders | Members’ liability is not limited |
1. Private limited company (Ltd)
A private company limited by shares is generally the clearest choice for an ordinary commercial business. The company has its own legal identity, shareholders own it and directors are responsible for running it.
A company limited by shares must have at least one shareholder. The same person can also be the sole director. The shareholders’ liability is normally limited to any amount left unpaid on their shares.
It may be suitable when:
- the organisation will trade for profit;
- ownership needs to be represented by shares;
- the owners want a familiar structure that can accommodate growth or investment; and
- limited liability is important.
This is the usual starting point for consultants, contractors, retailers, online businesses, property businesses and many family-run companies.
2. Limited liability partnership (LLP)
A limited liability partnership combines a separate legal identity and limited liability with a partnership-style management structure. It must have at least two designated members, who carry additional responsibility for matters such as accounts, confirmation statements and notifying Companies House of changes.
An LLP agreement normally sets out how profits are shared, how decisions are made and what happens when a member joins or leaves. Members are generally taxed on their share of the profits rather than the LLP being taxed in the same way as a limited company, but specific tax advice should always be taken.
It may be suitable when:
- two or more people want to operate as active business partners;
- the business needs flexibility over management and profit sharing;
- the owners want limited liability without using a conventional shareholder structure; and
- a detailed LLP agreement can be put in place.
LLPs are often used by professional practices and owner-managed firms. They are not simply another name for a limited company, and the accounting and tax treatment is different.
3. Company limited by guarantee
A company limited by guarantee has guarantor members instead of shareholders and shares. Each member promises to contribute an agreed amount—often a nominal sum—if the company is wound up and cannot meet its debts.
This structure is commonly used by clubs, membership organisations, associations and non-profit bodies. It does not automatically make the organisation a charity, and being “non-profit” does not remove the normal Companies House filing responsibilities.
It may be suitable when:
- the organisation does not need shareholders or share capital;
- surpluses will normally be retained for its stated purposes;
- membership and voting rights are more important than investment ownership; and
- the constitution needs to reflect a club, association or non-profit purpose.
4. Community interest company (CIC)
A community interest company is a limited company created for organisations that operate primarily to benefit a community rather than to maximise private profit. A CIC can be limited by guarantee or, in some cases, by shares.
Every CIC has a compulsory asset lock. Its assets and profits must be used for the community purpose, subject to the rules governing permitted transfers and payments. Directors must also file an annual community interest report alongside the company’s accounts.
It may be suitable when:
- the organisation will trade to deliver a clear community benefit;
- funders, customers or stakeholders should be able to see that commitment in the legal structure;
- the founders accept the long-term restrictions created by the asset lock; and
- a charity is not the preferred structure.
A CIC application requires a community interest statement and suitable constitutional documents, so it involves more than forming an ordinary limited company.
5. Property management company
A property management company can provide a structure through which owners or residents manage shared areas, services and responsibilities within a development.
It is important to understand that “property management company” is usually a description of the company’s purpose, not a separate statutory company type. The company is commonly limited by shares or by guarantee, with articles and membership provisions tailored to the development.
It may be suitable when:
- a development has common areas, facilities or service obligations;
- membership should be connected to ownership of a property;
- responsibility needs to transfer cleanly when a property is sold; and
- the company’s articles must reflect arrangements in leases, transfers or title documents.
The property documents should be reviewed carefully before the company is formed. A generic limited company may not contain the membership, voting and transfer provisions the development requires.
6. Unlimited company
An unlimited company has a separate legal identity, but its members do not benefit from a limit on their liability. If the company is wound up without enough assets to meet its liabilities, members may be required to contribute.
Companies House does not provide model articles specifically for unlimited companies. The constitutional documents must not include a provision limiting members’ liability, and specialist advice is sensible before proceeding.
It may be suitable when:
- there is a specific commercial, group or ownership reason for using it;
- the members fully understand and accept unlimited liability; and
- bespoke constitutional documents and professional advice are available.
This is not an alternative to choose simply because it sounds less restrictive. For most trading businesses, the protection offered by a limited structure is a major reason for incorporating.
Questions to answer before choosing
Before settling on a structure, consider:
- Purpose: will it trade for private profit, serve members, manage property or deliver a community benefit?
- Ownership: should ownership be represented by shares, partnership membership, guarantee membership or a link to property ownership?
- Profit: can profits be distributed to owners, or should they be retained for a stated purpose?
- Liability: what financial exposure are the members prepared to accept?
- Decision-making: who should vote, appoint directors or approve important changes?
- Funding: will the organisation seek investment, grants, loans or member contributions?
- Ongoing obligations: are the people involved ready to maintain accounts, confirmation statements and other statutory filings?
The tax consequences can also differ substantially, particularly between a limited company and an LLP. Formation advice should be coordinated with advice from your accountant, solicitor or tax adviser where appropriate.
What every registered structure will need
Whatever route is chosen, the organisation will need an acceptable name, constitutional documents, officer or member details and an appropriate registered office. A Northern Ireland company must keep its registered office in Northern Ireland.
A search of the Companies House register is a useful first step, but a name is not secured until Companies House accepts the incorporation. It is also sensible to consider existing trade marks because registration of a company name does not itself grant trade mark rights.
How The Company Shop can help
Our Belfast team has formed more than 22,000 companies and supports ordinary limited companies as well as LLPs, guarantee companies, CICs, property management companies and unlimited companies.
Start with our company formation options. You can compare the routes, check your proposed name against the live Companies House register and continue directly into the online order. If the structure is not straightforward, we will review the information and contact you if further details are needed.
This article is for general information only and reflects the position at the date of publication. It does not constitute legal, tax, accounting or other professional advice. The most suitable structure depends on the organisation’s circumstances, and rules may change. You should obtain advice from a suitably qualified professional before making a decision.