Starting your business: different types of companies in the UK

Starting a business in the United Kingdom marks the beginning of an exciting new chapter. It spells growth and novel opportunity, and adds diversity to your consumer base.

If you initially established your company outside the country, this is also a chance to gain exposure beyond a saturated domestic market, giving you an edge. Best of all, serving UK clients can help your venture raise its processes, products and services to global standards. 

The UK is a great business destination because it can help companies gain exposure to European and American markets. After all, the country is strategically close to mainland Europe and a major destination for US investors.  

In this article, we’ll introduce you to every main type of business structure available in the UK, so you can choose the one that aligns with your industry and expansion goals. 

Which different types of companies are there in the UK? 

There are six distinct business structures in the UK, each with different ownership and liability characteristics. 

What is a public limited company (PLC)? 

Public limited companies (PLCs) are public companies that can sell shares (or debentures) to the public via a stock exchange. Some PLCs are held privately – often by another PLC. To register as a PLC, a company must have at least £50,000 in potential share capital. Many PLCs start as private limited companies before re-registering after a period of growth. 

PLCs can be listed or unlisted on stock exchanges, which have stringent criteria to maintain the quality of listings. Generally speaking, shares are divided into these four categories: 

• Ordinary shares, as the name implies, are the standard shares of the company without special rights or restrictions. They may be categorized into classes with different values.  

• Preference shares typically have the privilege of receiving annual dividends before other classes, ensuring preferential treatment in distribution.  

• Cumulative preference shares hold the right to carry forward unpaid dividends to subsequent years if not paid in one year.  

• Redeemable shares are issued with an agreement for the company to repurchase them at the company's or shareholder's option after a specified period or on a fixed date. It's important to note that a company cannot exclusively have redeemable shares.  

Shareholders have limited liability, meaning their personal assets are protected in case of the company's financial liabilities. Similar companies in jurisdictions outside the UK are often called "publicly traded companies" or "corporations". 

What is a private limited company (Ltd, or Limited)? 

Private limited companies are set up directly with Companies House. Like PLCs, Ltd company shareholders and guarantors have limited liability, so their personal assets are usually protected. 

What is a private company limited by shares? 

A private company limited by shares is owned by non-government organisations or individuals and has a relatively small number of shareholders. The company has a share capital with individuals’ liability limited to the amount of unpaid shares of the capital they hold. The company operates as a distinct legal unit and is an individual in its own right. 

What is a private company limited by guarantee? 

Usually, charities, clubs, student unions, societies and social enterprises register as a company limited by guarantee. These do not have shareholders, only guarantors. Each guarantor’s liability is limited to a pre-agreed amount that they must pay if the company winds up. 

What is an unlimited company (Unltd)? 

Unlimited companies are attractive options for those who like to maintain a certain amount of confidentiality about the business’ financial status. There’s a catch, though: there’s no cap on the amount of member liability.  

If this type of UK business structure goes into liquidation, shareholders must settle all outstanding liabilities, regardless of their investment in the company. This holds true even if they are incorporated without share capital. Perhaps unsurprisingly, unlimited companies are usually businesses with a very low insolvency risk. 

What is a limited liability partnership (LLP)? 

In the UK, limited liability partnerships (LLPs) are treated like incorporated bodies, rather than partnerships. Misconduct and negligence liability is limited for each partner, so there’s no collective responsibility.  

Unlike a traditional partnership, limited partners directly manage the business. This differs for other companies, where members elect a board of directors that employ other members to manage the company. Additionally, LLPs don't need to pay corporation tax. Instead, untaxed profits are distributed among partners, who then need to file Self Assessment tax returns. 

What are co-operatives and community benefits societies? 

Created by the Cooperative and Community Benefit Societies Act 2014, co-operatives and community benefits societies exist for the benefit of their members, or the community. These two UK business structures replace the older industrial and provident societies (IPS) category.  

What is a co-operative? 

A co-operative is a business structure owned and controlled by its members for their mutual benefit. Members can include customers, employees, suppliers and other stakeholders, depending on the type of co-operative. 

Co-operatives may be involved in various sectors: retail, agriculture, worker-owned businesses and housing, for example. The democratic principle is central to co-operatives, with each member having an equal say in decision-making, no matter how much they’ve financially contributed. 

What is a community benefits society? 

A community benefit society is a specific type of co-operative that exists for the benefit of the wider community. These societies focus on community goals: providing social housing, renewable energy projects or local services, for instance. 

Any surplus generated by a community benefit society is typically reinvested in furthering its community-centric objectives. Like other co-operatives, community benefit societies stick to democratic principles, allowing members to participate in decision-making processes. 

What is a royal charter (RC)? 

A royal charter is granted the power (or license) to conduct business by the monarch. A few notable examples include the BBC, the Bank of England and the Royal Opera House, as well as some of the older universities.  

Acquiring a legal status through incorporation as an RC is a status symbol and is granted only to businesses that can demonstrate pre-eminence, stability and permanence while working for the good of the public. To apply, business owners must submit a petition to The Sovereign in Council, after they are sure that they meet the Charter’s stringent criteria. The registration process is long and costly. 

Special types of limited company 

It’s not always easy to meet strict Companies House limited liability company registration criteria – especially if you’re an entrepreneur running an unstructured SME. Thankfully, there are several non-standard limited company business structures available, too. 

Community interest companies (CIC) 

Limited companies set up to benefit the community are called community interest companies, or CICs. These can include housing associations, leisure centres and community development trusts, but not charities or political parties. All the organisation’s assets and profits should contribute toward the well-being of the community. 

Right to manage company (RTM) 

A right to manage company (RTM) is a special kind of private company limited by guarantee. RTMs are set up to give residential leaseholders the right to take over the management responsibilities of their properties from the landlord or the existing managing agent.  

To find out how to set up an RTM company, visit the GOV.UK website. To learn how you could be affected as a landlord, read this government guide. 

Societas Europaea (SE) 

Societas Europaea (SE), also known as European companies, are not only legal in the UK but can also be established in the European Economic Area (EEA). These are typically public limited companies that were transferred to the UK after the Brexit transition, and the ones registered in the UK are subsidiaries of those previously under the EEA.  

In the UK, SEs must have a registered head office and a minimum share capital of €120,000. It’s important to remember that some EEA laws apply differently in the UK than they do in Europe, so it’s best to take legal advice before pursuing SE registration.  

Is a sole trader a company? 

Sole traders aren’t companies in the UK, but they can register as “doing business as” (DBA) a company name. Instead, sole traders are self-employed people and have unlimited liability for all profits and losses they incur. What this means in practice is that a sole trader’s personal assets can be seized to repay business debts.  

Because they’re self-employed, sole traders don’t have to pay corporation tax. Instead, they pay income tax and national insurance via self-assessment. 

Setting up a business in the UK 

Whether you’re an experienced business owner or have an existing overseas business you’d like to expand into the UK, entering a new market can be challenging. It’s important to consider the advantages and disadvantages of each type of business structure to make sure you pick the right one.  

You’ll also benefit from having a UK account, which you can use to send and receive payments. Many traditional banks have strict account-setup criteria, which can be tricky to overcome if you’re new to the country. 

One alternative is an Interpolitan Money account. Interpolitan’s range of alternative accounts let you pay in more than 50 different currencies and do business in over 160 countries. Unlike other alternative payment providers, you’ll also receive personal attention from a dedicated account manager.  

With Interpolitan, you get: 

• Support for unstructured and complex entities – for example offshore trusts and free zone businesses, with multiple signatories allowed on a single account. 

• A quick 7–10-day account onboarding process. 

• Personal support via email or telephone. 

Ready to get started? Learn more about us, or open an account today.