A company is a legal entity formed to conduct business or other activities in the name of the association. Because it is incorporated it has a legal personality distinct from those of its members.
Private company limited by shares – this type of company has a share capital and the liability of each member is limited to the amount unpaid on shares that a member holds. A private company cannot offer it’s shares for sale to the general public.
Private company limited by guarantee – in this type of company members do not make any contribution to the capital during its lifetime as they do not purchase shares. The members’ liability is limited to the amount that they each agree to contribute to the company’s assets if it is wound up.
Private unlimited company – this type of company may or may not have a share capital and there is no limit to the members’ liability. Because there is no limitation on members’ liability, the company has to disclose less information than other types of company.
Public limited company – this type of company has a share capital and the liability of each member is limited to the amount unpaid on shares that a member holds. A public limited company may offer its shares for sale to the general public and may also be quoted on the stock exchange.
Companies’ legislation generally allows one or more persons to form a company for any lawful purpose by subscribing to its memorandum of association. However, a public company or an unlimited company must have at least two subscribers (this rule disappeared when the Companies Act 2006 came fully into force on 1 October 2009).
Company directors have certain obligations. They need to file statutory documents such as accounts and annual returns. There is also Corporation Tax to think about which is charged on company profits. Company directors are also employees of the company so there are different National Insurance and PAYE obligations.
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