In the UK, there are a variety of company types to choose from. Each type has its own characteristics, benefits and legal obligations, so choosing the right one is crucial for achieving your goals. In this guide, we’ll explore the different types of companies in the UK, their features and what makes each one unique.
What types of companies exist in the UK?
Companies in the UK fall into several broad categories, including private companies, public companies and other specialised companies. Whether you’re starting a small business or running a large corporation, there’s likely a structure that fits your requirements.
Private companies
Private companies are the most common type of company in the UK. These businesses are privately owned and not listed on the stock exchange. They can operate in different formats depending on the level of liability and the intended purpose.
Private company limited by shares (LTD) explained
An LTD is a private company where the liability of shareholders is limited to the value of their shares. This is the most popular type of private company for small and medium-sized businesses. LTDs must register with Companies House and file annual accounts, but they provide owners with the security of limited liability.
Key points:
Limited liability protects shareholders from personal financial losses
An LTD is one of the most common business structures in the UK
Owners must meet legal and financial reporting requirements
💡Editor's insight: What is liability?
"A business liability is a debt or financial obligation that a company owes to another entity. Liabilities can be lots of things, like money or services that a business needs to provide."
Private company limited by guarantee explained
A private company limited by guarantee does not have shareholders. Instead, members act as guarantors, agreeing to pay a nominal amount if the company faces financial difficulties. These companies are often used by non-profit organisations, such as charities and social enterprises, due to their focus on reinvesting profits rather than distributing them.
Key points:
Members have limited liability based on their guarantee amount
Commonly used for non-profit and charitable organisations
Profits are reinvested instead of being distributed
Private unlimited company explained
Private unlimited companies differ from other private companies because the owners (shareholders) have unlimited liability. This means they are personally responsible for any debts the company incurs. While rare, unlimited companies are chosen by businesses that want to maintain privacy, as they’re not required to file financial statements with Companies House.
Key points
Shareholders have unlimited liability for company debts.
Unlimited companies are less common in the UK.
Financial privacy is a significant advantage of this structure.
Limited liability partnership (LLP) explained
An LLP combines the flexibility of a partnership with the limited liability protection of a company. Each partner’s liability is limited to the amount they have invested or guaranteed. LLPs are popular among professional services firms, such as law practices and accountancy firms, because they allow partners to share profits while enjoying reduced personal risk.
Key points
Partners benefit from limited liability
Ideal for professional firms like lawyers and accountants
Profits are distributed among partners
Public companies
Public companies are designed for larger businesses that may want to raise capital by offering shares to the public. These companies have stricter regulatory requirements and transparency obligations.
Public limited company (PLC) explained
A PLC is a public company whose shares are traded on the stock exchange, making it easier to raise funds from investors. To become a PLC, a company must have a minimum share capital of £50,000, with at least 25% paid up. PLCs are subject to more stringent rules than private companies, including greater disclosure and governance standards. This structure is often used by larger organisations looking to expand quickly.
Key points
Shares are publicly traded, offering greater access to capital
PLCs must meet strict governance and reporting requirements
Suitable for large, growth-oriented businesses
Other types of companies
In addition to private and public companies, the UK recognises several specialised business structures. These cater to specific purposes or industries, offering tailored benefits and responsibilities.
Community interest company (CIC) explained
A CIC is a type of company designed for social enterprises that aim to benefit the community rather than prioritise profit for shareholders. CICs must pass a community interest test and adhere to regulations that ensure profits are reinvested into the business or a social cause. Learn more in our full guide to what is a community interest company.
Key points
CICs are intended for social enterprises and community projects
Profits are reinvested into the business or community
Can operate as limited by shares or guarantee
Right to Manage company (RTM) explained
RTM companies are formed by leaseholders who wish to take over the management of their residential property from a landlord. This gives tenants greater control over maintenance, service charges, and other management decisions. RTM companies are particularly beneficial for leaseholders who feel their property is not being managed effectively under the current arrangements.
Key points
RTMs give leaseholders control of property management.
Often used to address dissatisfaction with landlord management.
Focuses on residential property maintenance and costs.
Sole traders explained
While technically not a company, a sole trader is a common business structure in the UK. Sole traders are individuals who own and operate their business personally, taking full responsibility for its liabilities and debts. This structure is simple to set up, but the lack of limited liability means personal assets could be at risk if the business encounters financial difficulties. Learn the difference between a sole trader vs a limited company in our full guide.
Key points:
Sole traders own and operate their business personally
Simple to set up, but personal liability is unlimited
Ideal for small, independent businesses
What do you need to legally start a company?
To legally start a company in the UK, you need to choose a business structure, register the company with Companies House, and comply with financial and legal obligations. This includes providing key documentation and details during the registration process.
A company name that complies with legal requirements
An official registered address in the UK
At least one director (and a company secretary if required)
Shareholder details and share allocation (if applicable)
A memorandum and articles of association (outlining how the company will operate)
Registration with Companies House and HMRC for tax purposes
Final thoughts
Choosing the right company structure is a critical decision that can shape the future of your business. From the simplicity of a sole trader setup to the robust governance of a PLC, UK company types offer something for every need. Carefully consider your business goals, the level of liability you’re comfortable with, and any regulatory obligations before deciding.
Consulting with a legal or financial professional can help ensure you make the best choice for your circumstances. If you need legal advice, get in touch today to see how our small business solicitors can help.
References
Limited companies from Gov.UK
Choosing the right business structure from Companies House
Disclaimer: This article only provides general information and does not constitute professional advice. For any specific questions, consult a qualified accountant or business advisor. Bear in mind that tax rules can change and will differ based on your circumstances.