Definition
A company limited by guarantee is a company with members and no shareholders. Each member promises to pay a fixed sum, often £1, if the company is wound up. It is the usual form for charities, clubs and most community interest companies.
How it differs from a company limited by shares
| Limited by shares | Limited by guarantee | |
|---|---|---|
| Owned by | Shareholders | Members |
| Liability limited to | The amount unpaid on their shares | The amount of their guarantee |
| Share capital | Yes | None |
| Profits | Can be paid out as dividends | Normally kept for the company’s purposes |
In the accounts
The balance sheet of a company limited by guarantee has no share capital line. A note states that the company is limited by guarantee and gives the amount each member has undertaken to contribute.
Everything else is the same
It is incorporated at Companies House, has directors, files annual accounts and a confirmation statement, and pays Corporation Tax on any taxable profits, unless it is a charity entitled to exemption.
Read more: The company limited by guarantee note.