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Different Types of UK Companies

There are Iour main different kinds of UK companies which can be registered. Each might be
suitable in speciIic situations, although to some extent, more than one type oI company may
satisIy the particular requirements oI the purchaser.
The difference types of company in the UK are: companies limited by shares, companies
limited by guarantee, public limited companies (PLCs) and less commonly known, unlimited
companies.
When Iorming a company, the choice oI which type of business structure to adopt is an
important one and requires adequate consideration.
anging te type of company might be possible in certain situations, whereas in others, it
would not be an option.
Whilst it is possible to change a private company limited by shares to a PLC, it is not permissible
to change the Iundamentals oI the incorporation and migrate it to a limited by guarantee entity.
Registering a company oI any kind will carry with it its own set oI business regulations which
have to be adhered to. Some oI the requirements are more stringent and potentially onerous than
others, particularly those Ior public limited companies.
The purchasers should consider their capacity to both manage and Iund whichever kind oI entity
they select and might wish to plan a migration route to another kind of company based on their
Iuture ambitions and plans.

O So|e propr|etorsh|pť A sole proprleLorshlp ls a forŴproflL buslness owned by one personŦ 1he
owner may operaLe on hls or her own or may employ oLhersŦ 1he owner of Lhe buslness has
unllmlLed llablllLy for Lhe debLs lncurred by Lhe buslnessŦ
O 9frtnersh|pť A parLnershlp ls a forŴproflL buslness owned by Lwo or more peopleŦ ln mosL forms
of parLnershlpsţ each parLner has unllmlLed llablllLy for Lhe debLs lncurred by Lhe buslnessŦ 1he
Lhree Lyplcal classlflcaLlons of parLnershlps are general parLnershlpsţ llmlLed parLnershlpsţ and
llmlLed llablllLy parLnershlpsŦ
O orporft|onť A corporaLlon ls a llmlLed llablllLy buslness LhaL has a separaLe legal personallLy
from lLs membersŦ CorporaLlons can be elLher governmenLŴowned or prlvaLelyŴownedţ and
corporaLlons can organlze elLher forŴproflL or noLŴforŴproflLŦ A prlvaLelyŴownedţ forŴproflL
corporaLlon ls owned by shareholders who elecL a board of dlrecLors Lo dlrecL Lhe corporaLlon
and hlre lLs managerlal sLaffŦ A prlvaLelyŴownedţ forŴproflL corporaLlon can be elLher prlvaLely
held or publlcly heldŦ
O ooperft|veť CfLen referred Lo as a ƍcoŴopƍţ a cooperaLlve ls a llmlLed llablllLy buslness LhaL can
organlze forŴproflL or noLŴforŴproflLŦ A cooperaLlve dlffers from a forŴproflL corporaLlon ln LhaL lL
has membersţ as opposed Lo shareholdersţ who share declslonŴmaklng auLhorlLyŦ CooperaLlves
are Lyplcally classlfled as elLher consumer cooperaLlves or worker cooperaLlvesŦ CooperaLlves
are fundamenLal Lo Lhe ldeology of economlc democracyŦ

Types of UK Companies

UK companies are a common Iorm oI business entity in the UK Ior carrying out some trade oI
other venture.
The main types of company are: private and public limited and unlimited companies. Those
which Iall in to the private category can be Iurther divided in types which are limited by
guarantee and tose by sares.
ll oI the above types oI business entity are incorporated by Companies House.
The latter type, private companies limited by shares are by Iar the most common Iorm oI
registered entity in the UK.
rivate Companies Limited by Sbares
This type oI business is a traditional trading entity. It is owned by shareholders and is run by at
least one director.
Whilst the speciIic activities which this type oI company will be engaged in will vary, businesses
adopting this structure are usually engaged in some Iorm oI proIit seeking enterprise.
rivate Companies Limited by Cuarantee
Private companies limited by guarantee are not Ior proIit organisations such as charities and
societies.
They have members rather than shareholders and would not be permitted to distribute excess
income to them. ny surpluses would be retained Ior Iuture activities and given back to the
original source iI no such projects were available.
The object clauses oI a company limited by guarantee are usually Iar more speciIic than those oI
a business limited by shares.
In many cases, such entities are set up with a particular purpose in mind and thus stating these
objectives might ensure that the actual activities do not deviate Irom this stated reason.

ublic Limited Companies LCs
Public limited companies are usually larger business entities engaged in some trading activity
with the view oI making a proIit.
company seeking a listing on the London Stock Exchange must be a PLC beIore admission
can be granted.
inimum Sare apital Requirements
public limited company have minimum share capital requirement which must be met beIore
Companies House will incorporate the company.
The rules are that there must be at least £50,000 worth oI shares issued on incorporation with at
least £12,500 paid up.
ecause oI the necessity to deposit this sum oI money with the company up on registration, the
number oI this type oI entity which are Iormed in the UK are Iewer than Ior private companies
which do not require any initial deposits.

Unlimited Companies
Unlimited companies are those which are incorporated without limited liability. This type oI
business entity is extremely rare in the UK.
One situation where an unlimited company might be appropriate is where individuals essentially
require a partnership business, but wish to avoid the time and expenses involved in draIting a
detailed agreement.
The share distribution (and the rights which each conIers) available through a company might be
preIerable.







Tbe Different Types of Business Status in Tbe UK
1he followlng gulde ls deslgned Lo help you undersLand Lhe varlous sLrucLures and formaLs of uk
buslnessesţ from sole Lrader Lo ÞLCŦ
Please click on the Iollowing headings to learn more...
Sole Trader
Private Limited ompany
Public Limited ompany
Limited Liability Partnersip
Guarantee ompany
Sole Trader
This is the simplest Iorm oI company, requiring no registration other than the notiIication oI your
local tax oIIice, but it is also the type oI business exposed to the greatest personal risk: as a sole
trader, you are responsible Ior all aspects oI the company, and have unlimited liability to all
debts and legal actions. You may Iind it more diIIicult to attract outside investment or partners,
which can hinder the expansion oI the business. You might also Iind it more diIIicult to attract
business you do not have to Iile accounts or records with Companies House, giving a lack oI
company transparency, and making it impossible Ior potential customers to veriIy your
background via an oIIicial third party.
s a sole trader you are eIIectively the business, Ior example Joe loggs trading as J Design. II
the business were to Iold with debts you would have to settle these debts Irom your personal
assets.
Return to top
rivate Limited Company {Ltd]
private limited company is a legal entity in its own right, separate Irom those who own it, the
shareholders. The limited liability, potential tax advantages, and simplicity oI running a private
limited company make this the most common Iorm oI registered business in the UK. s a
shareholder oI a private limited company, your personal possessions remain separate (unless they
are secured against the business Ior borrowing), and your risk is reduced to only the money you
have invested in the company and any shares you hold which you have not yet paid Ior. The
minimum requirements Ior a limited company are detailed here.
In addition to limited liability this Iorm oI company is also considered to be more prestigious by
other companies and the general public due to its legitimate nature and the way important
inIormation is recorded at Companies House. nyone wishing to do business with your limited
company can veriIy who is connected to the company and also the Iinancial position oI the
company by paying Companies House a small Iee. You may not consider this transparency to be
a beneIit to you personally but it is consider a huge advantage when doing business.
Return to top
ublic Limited Company {lc]
public limited company diIIers Irom the private version in that it is able to sell its shares to the
public, and may be quoted on the stock exchange or alternative investment mark et. public
company must satisIy Companies House that at least £50,000 worth oI shares has been issued
beIore it is entitled to begin business or borrow money, and two directors must be appointed. The
cost oI running a public limited company are considerably higher, and so this Iorm oI business is
better suited to large organisations.
Return to top
Limited Liability artnersbip {LL]
This allows business partners to enjoy the beneIit oI limited liability, avoiding the problems oI
joint and several liability that apply to ordinary partnerships. While there are no shares in this
Iorm oI company, and tax arrangements remain the same as Ior ordinary partnerships, a
partnership deed will need to be drawn up to speciIy, among other things, how proIit is split and
what happens in the event the partnership is wound up. To Iorm an LLP please contact us to
discuss.
Return to top
Cuarantee Company {non profit]
In simple terms, a guarantee company is a not-Ior-proIit company, and is the type most oIten
Iormed by charitable organisations. guarantee company does not have share capital, and the
members do not own the company they are decision-makers Ior the company, but do not
receive any proIits, and have no claim on the company's assets. ll income generated is used to
cover operating costs and to achieve the objectives oI the company. To Iorm a Guarantee
Company please contact us to discuss.


ttp://www.elplinelaw.com/article/sriº20lanka/164



REGISTRATION OF A OPANY IN SRI LANKA

The Companies ct (No. 17 oI 1982) contains the rules, procedures, accounting and reporting
requirements Ior companies incorporated or registered in Sri Lanka. The registration oI
companies, Iiling oI accounts and annual returns are done with the Registrar oI Companies.

TYPE OF OPANIES

s per the law oI the Country one may establish the Iollowing types oI companies:

Private ompanies

private company must consist oI at least two and not more than IiIty members. It must have at
least one director. private company cannot invite public subscription Ior its shares.

Public ompanies

t least seven members are required to Iorm a public company (there is no upper limit). It must
have at least two directors. Public companies may invite public subscriptions Ior their shares or
debentures and other securities, and can also be listed on the stock exchange. They cannot
commence business without a business commencement certiIicate.

Offsore ompanies

company registered within or outside Sri Lanka may register itselI in Sri Lanka as an oIIshore
company to carry on any business outside the shores oI Sri Lanka. II a company registered
outside Sri Lanka registers itselI as an oIIshore company, it is deemed to have been incorporated
in Sri Lanka. n oIIshore company cannot conduct any business in Sri Lanka

Subsidiaries

To establish a business in Sri Lanka Ioreign companies can incorporate as a local subsidiary
company. Following incorporation, a subsidiary in Sri Lanka must comply with all statutory
requirements imposed on domestic companies.

Brances

company incorporated outside Sri Lanka may establish a place oI business in Sri Lanka by
registering a branch oIIice with the Registrar oI Companies. pplications Ior registration must be
made within one month oI establishing a place oI business in Sri Lanka. Generally approval Irom
the relevant line ministry would be required beIore the registration can be completed. The
liability oI a branch extends to its Ioreign assets.

Liaison/Representative Offices

company incorporated outside Sri Lanka may maintain its presence in Sri Lanka through a
representative oIIice, and is oI similar status to that oI a branch oIIice. It is however, prohibited
Irom engaging in any trading or investment activity or accruing any turnover in Sri Lanka. No
tax incident arises since it is not permitted to trade. ThereIore, the question oI permanent
establishment is not relevant.

1oint Venture ompany

joint venture can be with other Sri Lankan companies or Ioreign entities. joint venture
business may be incorporated or carried on as an unincorporated business similar to that oI a
partnership. Joint ventures have become popular in recent years; particularly in export oriented
projects.

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