Types of companies in the UK

Investors can open several types of companies in the UK, such as the company limited by shares, the company limited by guarantee, or the community interest company. The primary advantage of opening a legal form as a limited company is that it is a separate legal personality from its founder(s).

Our team offers complete solutions for company formation in the UK and assists entrepreneurs, both local and foreign, who wish to open a limited company, and who, for this purpose, are interested in the various business structures in the UK.

Understanding the main provisions of the Companies Act is useful before one commences the company set up phase, however, our lawyer in England can provide needed answers, and legal advice, to entrepreneurs who have already opened their business in the United Kingdom.

Read below to find out more about the types of business in the UK, and reach out to our team as needed if you have any other questions.

The main types of companies in the UK

According to the Companies Act 2006, the following legal forms are available for incorporation in the UK:

1. Company limited by shares: most companies are incorporated under this form. The founders own shares and their liability is limited to their investment in the company. Public limited companies in the UK are limited by shares, and so are private limited companies;
2. Company limited by guarantee: the members offer a guarantee or agree to pay a certain amount if the company is liquidated;
3. Community interest company: this is a company limited by shares or guarantee, incorporated to provide benefits to a community. It can be seen as an alternative form of charity;
4. Other legal forms: apart from the business structures in the UK listed above, entrepreneurs can also set up partnerships or sole traders.

Companies limited by shares are the most commonly used types of companies in the UK, whether they are public or private. A significant difference between the two is that the former can also become a listed company (to list its shares on a stock exchange).

At least one member is required to open a company limited by shares. Moreover, the management of the business is separate from its shareholders, and it is performed by a director or a Board of Directors.

Our lawyer in the UK from our team can provide you with detailed information about each of the types of companies in the UK, as well as specific requirements that apply to each type.

General company formation steps

The short guide below explains the main steps needed to set up a limited company. It can be useful to those who wish to open public limited companies in the UK, as well as to those interested in other types of companies in the UK:

1. Choose the type of company that is suitable for your needs;
2. Determine the shareholding structure/the guarantors;
3. Choose a company name;
4. Prepare the documents necessary to set up a company in UK: the Memorandum and Articles of Association;
5. Register your company with the Companies House and register for Corporation Tax (usually at the same time).

Running a company in the UK

Once your company is registered, you may need to apply for additional licenses or permits, depending on the type of activity you will be undertaking.

As far as tax compliance is concerned, the following taxes apply to UK businesses:

• a 25% corporate income tax applies to businesses with profits of more than GBP 250,000;
• a 19% small profits tax is applied to companies with profits of GBP 50,000 or less, and different rules apply to companies with profits between these two thresholds;
• the standard value-added tax is 20% and a reduced rate of 5% applies in the case of certain items; some goods and services and zero-rated;
• VAT registration is mandatory for companies with a taxable supply that exceeds GBP 85,000 for the preceding 12 months.

You will also need to follow the rules for filing the accounts and the tax return, as well as those relating to hiring staff in the UK. You can also hire an accountant to help you comply with the ongoing filing and tax payment obligations.

If you would like to know more about the types of companies in the UK before you start the incorporation process, or if you need other information, do not hesitate to contact our lawyer in London.

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