What are the Most Common Types of Business in the UK?
Maria Peloponisiou~ 4 min Reading time | 04. Jun 2019
While there are many different types of companies in the UK they don’t operate in the same way. Companies are classified into specific classes due to the way they are run, who owns the company and how much responsibility they have for the liabilities. Below you will find an explanation about the most common types of business in the UK:
A public limited company is, in essence, a corporation that is owned by the public. Anyone can buy shares if they wish. A company such as this is a corporation and an individual’s financial liability is restricted to a specific sum. The sum in questions tends to be the value of the individual’s investment. Before a public limited company starts trading it must have a least £50,000 of allotted shares. PLC’s are one of the most common companies around.
A Private Company Limited by Shares (LTD)
A private company cannot be owned by the public. Instead, it will be owned by a non-government organisation or a small number of shareholders. The sale of a limited company is usually handled quite privately. Private companies are limited in much the same ways as PLC’s are in that an individual’s financial liability is restricted to a specific sum. The sum in questions tends to be the value of the individual’s investment.
Company Limited by Guarantee (CLG)
A company such as this is quite different to PLC’s and LTD companies. As far as this type of company is concerned an individual who has made an investment is not responsible for a fixed sum. A company limited by guarantee has members who act as the company’s guarantors. The guarantors agree to contribute a small sum towards the company should it wind up. According to the law in the UK, companies such as these should have “Limited” in their name, but exceptions are made for companies that don’t distribute profits to their members.
Unlimited Company (Unltd)
There is no restriction on how much money shareholders are required to pay if an unlimited company goes into liquidation as opposed to a limited company. If this were to happen the shareholders are wholly responsible for settling any financial liabilities that are outstanding. This is irrespective of how much they invested in the company.
Limited Liability Partnership (LLP)
LLP’s are not treated as legal partnerships, instead, they’re treated as if they were incorporated bodies. An LLP has partners who have limited liabilities. This means that they’re responsible for their negligence or misconduct rather than that of the whole company. One element of a limited liability partnership is that the partners can manage the business. In other types of companies, it is the shareholders who all vote to elect directors to their board. The board then employs people to manage their company.
Community Interest Company (CIC)
A company will be given this status if they are not looking to maximise their profits for shareholders. Rather, social enterprises have the intention to use all of their assets and profits to help their local community. A company such as this is very easy to get set up and they’re run to ensure that shareholders do now make any profit. A lot of CIC’s put all of their profits into the community with the intention of improving all of the services they offer.
Royal Charter (RC)
A company that has been created by Royal Charter has been granted specific power or a right by the monarch. While all companies had to be approved by RC many years ago this is no longer the case as different types of business need to operate in different ways. Chartered organisations such as the Royal Opera House and the BBC are occasionally quite well known. However, there are some that have very little impact on your day-to-day business.
A sole trader is an individual who is the only owner of a business. They can keep all of the business’ profits after tax. However, a sole trader is liable for all of their business’ losses. There is no specific distinction between the owner of the business and the business itself.