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    Chapter 1 – Incorporating a company

    A registered company is a legal entity with a separate identity from those who own or operate it. Most companies are limited liability companies which mean the liability of the members is limited by shares or by guarantee. Some companies are unlimited companies which means the members have unlimited liability.

    1. Who can form a company?

    One or more persons can form a company for any lawful purpose by subscribing their name(s) to the memorandum of association and complying with the legal requirements for incorporation. In law, ‘person’ includes individuals, companies and other corporations. Those persons who subscribe their names to the memorandum of association are known as “subscribers”.

    2. Is there more than one type of company?

    There are four main types of company:

    Private company limited by shares: This type of company has a share capital and the liability of each member is limited to the amount, if any, unpaid on their shares.  A private company cannot offer its shares for sale to the general public.

    Private company limited by guarantee: This type of company does not have a share capital and its members are guarantors rather than shareholders.  A company is limited by guarantee if the members liability is limited to such amount as the members undertake to contribute to the assets of the company in the event of its being wound up.

    Private unlimited company: This type of company may or may not have a share capital but there is no limit to the members’ liability. Because the members’ liability is unlimited, the company has to disclose less information than other types of company.

    Public limited company: This type of company has a share capital and limits the liability of each member to the amount unpaid on their shares. A public limited company may offer its shares for sale to the general public and may also be quoted on the stock exchange. 

    Community Interest companies (CICs) can be incorporated as private or public companies. Further information about CICs can be found in chapter 7.  Private companies also include Right to Manage Companies and Commonhold Associations.

    Companies House website 18.12.09