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What are you trading as? (2/3): Companies

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Simply ‘setting up a business’ is not as straightforward as it might sound.

There are a multitude of ways in which a business can go about its operations and a variety of factors which should be considered in weighing up this decision. The Corporate & Commercial team at BakerLaw have a host of experience advising businesses of all forms and are able to advise you on which trading vehicle might be most appropriate for your business needs.

In this series of articles, we have set out an explanation of some of the options that businesses have when deciding how to operate. In our second instalment, we will consider the possible forms of companies available.

Companies:

A company has an entirely separate legal personality from its members. In most cases companies are limited (either by shares or by guarantee), but it is possible to have an unlimited company.

Limited by shares:

This is the most common form of company. A company limited by shares must have a share capital. This is comprised of the nominal value of each issued share of the company. The shares are held be shareholders, and the shareholders’ liability is limited to the amount of shares that they have bought in the company. There are very strict rules and regulations surrounding the use and alteration of a company’s share capital, and a company’s ability to pay out money to shareholders.

It is possible to have a company limited by shares that is private or public. A public limited company must have a share capital of at least £50,000, whereas there is no lower limit on the share capital of a private limited company. A private limited company is prohibited from offering its shares for sale to the public, whereas a public limited company is not, and can list its shares on a recognised investment exchange.

Limited by guarantee:

A company limited by guarantee does not have a share capital. Instead, the members undertake to make a predetermined contribution to the creditors of the company in the event that the company is wound up and cannot cover its liabilities on its own.

Unlimited:

An unlimited company may have a share capital, but it does not need one. There is no limit on the liability of the members of an unlimited company.

Hopefully this has helped clarify a couple of the mechanisms available to conduct business under. In the last instalment of this series we will cover unincorporated associations and community interest companies. If you are looking for advice and would like to discuss how we can help you to structure your business, please contact Simon Porter in BakerLaw’s Corporate & Commercial Department or call 01252 730754.

This article is not a definitive statement of the law. It is designed as a free update on the law at the time of publishing. It is not a substitute for legal advice on specific facts and circumstances. BakerLaw LLP and/or the writer accepts no liability or responsibility for reliance on this article and recommends that you seek independent legal advice on your specific circumstances prior to taking any steps.

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