{"id":1800,"date":"2022-01-17T02:55:27","date_gmt":"2022-01-17T02:55:27","guid":{"rendered":"https:\/\/uk.legalvision.com.au\/?p=1800"},"modified":"2026-03-30T06:04:31","modified_gmt":"2026-03-30T05:04:31","slug":"limited-vs-unlimited-company","status":"publish","type":"post","link":"https:\/\/legalvision.co.uk\/corporations\/limited-vs-unlimited-company\/","title":{"rendered":"Limited Company vs Unlimited Company in England and Wales"},"content":{"rendered":"\n<p>A limited company restricts shareholders\u2019 liability to their investment, while an unlimited company exposes owners to <a href=\"https:\/\/legalvision.co.uk\/corporations\/incorporate-a-company-england-wales\/\">full personal liability<\/a> for business debts. For your business, this choice directly affects financial risk, investor confidence and compliance obligations, with limited companies offering protection and credibility, and unlimited companies providing greater privacy but significantly higher personal exposure. You must weigh risk tolerance, growth plans and reporting requirements before choosing a structure. This article explains the key differences between limited and unlimited companies, including their advantages and disadvantages.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Business Structures<\/h2>\n\n\n\n<p>There are several different business structures in England and Wales. The most common ones are:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>sole traders;&nbsp;<\/li>\n\n\n\n<li>general partnerships;&nbsp;<\/li>\n\n\n\n<li>limited liability partnerships; and&nbsp;<\/li>\n\n\n\n<li>companies.<\/li>\n<\/ul>\n\n\n\n<p>Likewise, within companies, we can distinguish between two different kinds:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>limited companies; and&nbsp;<\/li>\n\n\n\n<li>unlimited companies.&nbsp;<\/li>\n<\/ul>\n\n\n\n<p>Further, within private limited companies, there are two forms:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>companies limited by shares; and&nbsp;<\/li>\n\n\n\n<li>companies limited by guarantee.<\/li>\n<\/ul>\n\n\n\n<div  class=\"box box--icon box--info\">\n    <p>The vast majority of companies in England and Wales are companies limited by shares. However, some companies exist as unlimited companies, as well as companies limited by guarantee.<\/p>\n<\/div>\n\n\n\n<p>All companies share the commonality that they exist as their own legal entities. This means they can own property, enter into contracts, and be sued as well as sue others. This is why they are considered a type of \u201cincorporated business structure\u201d because the law recognises that they are their own legal person. They are legally distinct from their owners.&nbsp;&nbsp;<\/p>\n\n\n\n<p>Below, we examine the key differences between limited and unlimited companies in the context of a private company.&nbsp;<\/p>\n\n\n\n    <div class=\"my-7 lg:my-10 border-y-2 border-gray-100 py-7 lg:py-10 flex flex-col sm:flex-row items-start gap-10\">\n                    <img decoding=\"async\" class=\"w-52 mx-auto my-0! rounded\" src=\"https:\/\/img.legalvision.com.au\/wp-content\/uploads\/sites\/4\/2023\/05\/19032432\/Screen-Shot-2023-05-19-at-12.24.24-pm.png\" alt=\"Front page of publication\"\n                 loading=\"lazy\" width=\"208\" height=\"298\">\n                <section>\n            <div class=\"text-2xl font-bold\">Company Registers<\/div>\n            <div class=\"body-text\">\n                <p>When you incorporate a company in England and Wales, you must maintain a number of company registers at its registered office or at the Companies House. This template includes these company registers.<\/p>\n            <\/div>\n            \n\n<a href=\"https:\/\/legalvision.co.uk\/documents\/company-registers\/\" class=\" block px-5 py-3.5 max-w-fit bg-orange button__hover transition rounded text-white font-bold text-lg no-underline uppercase leading-tight text-center\" target=\"\" rel=\"\">Download Now<\/a>        <\/section>\n    <\/div>\n\n\n\n\n<h2 class=\"wp-block-heading\">Limited Companies<\/h2>\n\n\n\n<p>The overwhelming majority of businesses incorporated as companies in England and Wales are limited companies. Of all limited companies, nearly all are those limited by shares.&nbsp;<\/p>\n\n\n\n<div  class=\"box box--icon box--info\">\n    <p>Companies limited by guarantee tend to be not-for-profit organisations such as charities, members\u2019 sports clubs, and professional organisations.<\/p>\n<\/div>\n\n\n\n<p>As their names suggest, companies have in common the fact that their owners benefit from the legal principle of \u201climited liability\u201d.&nbsp;<\/p>\n\n\n\n<p>All limited companies have an obligation to file accounts and keep Companies House up to date with key information regarding the company&#8217;s financial position and ownership. Companies House is the public body responsible for regulating companies. Likewise, all companies will have their articles, which are formal documents that outline how <a href=\"https:\/\/legalvision.co.uk\/corporations\/founder-director-shareholder\/\">directors and shareholders<\/a> will manage the company.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Understanding Limited Liability&nbsp;<\/h3>\n\n\n\n<p>Limited liability refers to the legal concept where the owners of a company are only partly liable for their company\u2019s debts.&nbsp;<\/p>\n\n\n\n<p>Therefore, in the event the company ceases to trade, if it owes other parties money, these parties (often referred to as \u201ccreditors\u201d) can only recover their debt from the company&#8217;s assets. Importantly, creditors cannot usually pursue the owners if the company does not have sufficient funds.<\/p>\n\n\n\n<div  class=\"box box--icon box--info\">\n    <p>The distinction between companies limited by shares and by guarantee is how the principle of limited liability operates.<\/p>\n<\/div>\n\n\n\n<h3 class=\"wp-block-heading\">Companies Limited by Shares&nbsp;<\/h3>\n\n\n\n<p>The basic principle of a company limited by shares is that a company\u2019s owners (\u201cshareholders\u201d or \u201cmembers\u201d) own shares in the company, usually in exchange for providing the capital to trade and expand or for providing their services to the company (referred to as \u201csweat equity\u201d).&nbsp;<\/p>\n\n\n\n<p>Shares are similar to money as their value is linked to the value of the company. They are also a measure of ownership within the company.&nbsp;<\/p>\n\n\n\n<p>Likewise, the company\u2019s <a href=\"https:\/\/legalvision.co.uk\/corporations\/advantages-share-capital\/\">share capital<\/a> will refer to the shares the company has issued to its shareholders.&nbsp;<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">For Example<\/h4>\n\n\n\n<p>You own a company called FunCo Limited (\u201cFunCo\u201d), along with your business partners Maryanne and Connell. The number of shares issued to each shareholder is:<\/p>\n\n\n\n<figure class=\"wp-block-table is-style-regular\"><table class=\"has-fixed-layout\"><tbody><tr><td><strong>FunCo Shareholders<\/strong><\/td><td><strong>Number of Shares&nbsp;<\/strong><\/td><\/tr><tr><td>You<\/td><td>10,000<\/td><\/tr><tr><td>Maryanne<\/td><td>5,000<\/td><\/tr><tr><td>Connell<\/td><td>5,000<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>We would say FunCo\u2019s issued share capital is 20,000 ordinary shares. This is because 10,000 + 5,000 + 5,000 = 20,000. Likewise, there is only one class of shares.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Limited Liability in a Company Limited by Shares<\/h3>\n\n\n\n<p>If you own shares in a company limited by shares, your liability for the company\u2019s debts will not usually exceed the amount of money you have invested in the company.&nbsp;<\/p>\n\n\n\n<p>Retuning to the example of FunCo:<\/p>\n\n\n\n<p>When you and your partners incorporate FunCo into a company, each person contributed to FunCo a certain amount of money:<\/p>\n\n\n\n<figure class=\"wp-block-table is-style-regular\"><table class=\"has-fixed-layout\"><tbody><tr><td><strong>FunCo Shareholders<\/strong><\/td><td><strong>Amount Invested<\/strong><\/td><\/tr><tr><td>You<\/td><td>\u00a310,000<\/td><\/tr><tr><td>Maryanne<\/td><td>\u00a35,000<\/td><\/tr><tr><td>Connell<\/td><td>\u00a35,000<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p><br>You will note that the amount invested seems to correspond to the number of shares each person owns. In practice, the number of shares does not always equate to the amount of money you invested for various reasons beyond the scope of this article.&nbsp;<\/p>\n\n\n\n<p>If FunCo makes a profit, because you own twice as much as your partners, you are entitled to 50% of any dividend declared. In contrast, Maryanne and Connel are each entitled to 25%, provided that all shareholders hold the same class of shares with the same dividend rights.<\/p>\n\n\n\n<p>Suppose, after a year of trading, FunCo has a bad year because of an unexpected pandemic.&nbsp;<\/p>\n\n\n\n<p>Through no real fault of you and your business partners, you spent all of the company\u2019s cash and could only generate \u00a315,000 in revenue. However, you still owe \u00a35,000 to your suppliers.&nbsp;<\/p>\n\n\n\n<p>In other words, FunCo is \u00a35,000 in debt to its creditors. If you and your partners decide not to invest any more money in FunCo to rescue it, your creditors will want to recover their money. However, if there is no cash and not enough assets to sell to recover the debt, even though you effectively own 50% of the company, you will not be liable for the company\u2019s debt.&nbsp;<\/p>\n\n\n\n<div  class=\"box box--icon box--info\">\n    <p>Your liability to creditors and that of your partners is limited to the amount you are required to pay for your shares (i.e the unpaid share capital).<\/p>\n<\/div>\n\n\n\n<h3 class=\"wp-block-heading\">Liability Limited by Guarantee<\/h3>\n\n\n\n<p>At the point a company is incorporated as one limited by guarantee, each of the company\u2019s owners (or \u201cmembers\u201d) states that if the company runs into financial difficulty, they will pay a certain sum of money to the creditors. This is called the \u201cstatement of guarantee\u201d. By law, the members will owe no more than this guaranteed amount.&nbsp;<\/p>\n\n\n\n<p>In practice, the specified sum is generally a nominal amount such as \u00a31.&nbsp;<\/p>\n\n\n\n<p>Since there are no shares, there is no share capital. Likewise, this makes it considerably more difficult for owners to share in the company\u2019s profits compared to a company limited by shares.&nbsp;<\/p>\n\n\n\n<p>For the same reason, it is helpful for non-profit organisations to incorporate as a company limited by guarantee. The organisation can own property and enter into contracts. However, the owners will not be liable for the company\u2019s debts beyond the amount guaranteed by them. It also removes the need to transfer shares each time a new owner joins the organisation.&nbsp;<\/p>\n\n\n\n\n<a href=\"#content-next\"\n   class=\"block p-4 mt-10 text-xl font-bold text-center text-white no-underline bg-gray-800 rounded-t-xl\">\n    Continue reading this article below the form\n    <i class=\"text-xl fa-regular fa-arrow-down\"><\/i>\n<\/a>\n<div class=\"px-6 pt-10 pb-12 mb-10 text-center bg-gray-100 rounded-b-xl sm:px-12 test\">\n    <div class=\"mb-8 text-2xl font-bold text-orange\">\n        Need legal advice?\n        <br>\n        <span class=\"text-lg not-prose\">\n                            Call <a href=\"tel:+448081968584\" class=\"not-prose\">0808 196 8584<\/a> for urgent assistance.\n                <br>\n                Otherwise, complete this form, and we will contact you within one business day.\n                    <\/span>\n    <\/div>\n\n    \n\n<div class=\"not-prose flex justify-center text-left gform_input_bg_white    \">\n    <script>\nvar 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This means creditors can pursue each member of the company if it does not have enough assets to cover its liabilities.&nbsp;<\/p>\n\n\n\n<p>This is offset by the fact that there are fewer requirements for unlimited companies to file accounts and annual reports with Companies House. Its owners also have greater flexibility in managing the company\u2019s share capital.&nbsp;<\/p>\n\n\n\n<div  class=\"box box--icon box--info\">\n    <p>For most businesses, the benefit of limited liability is the main reason business owners incorporate their business into a company in the first place.<\/p>\n<\/div>\n\n\n\n<p>However, if you run a business where limiting your liability is not a concern, but you do not want to disclose information as you would if you were a limited company, an unlimited company may be relevant.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Key Takeaways&nbsp;<\/h2>\n\n\n\n<p>The key difference between limited companies and unlimited companies is the extent to which the company\u2019s owners are liable for its debts if the company is unable to satisfy its debts. For limited companies, the owners\u2019 liability is either limited by the value of their shareholding in the company (a company limited by shares) or by an amount guaranteed at the time the company was incorporated (a company limited by guarantee). For unlimited companies, there is no limit to the owners\u2019 liability for the company&#8217;s debts. Indeed, the vast majority of companies trade using the limited by shares model.&nbsp;<\/p>\n\n\n\n<p>If you need help deciding if a limited or unlimited company is right for you, LegalVision provides ongoing legal support for businesses through our fixed-fee legal membership. Our experienced <strong><a href=\"https:\/\/legalvision.co.uk\/corporate-lawyers-lp\/\">corporate lawyers<\/a><\/strong> help businesses manage contracts, employment law, disputes, intellectual property, and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision\u2019s legal membership, call <a href=\"tel:+448081968584\" class=\"AVANSERnumber dynamic-number\">0808 196 8584<\/a> or <a href=\"https:\/\/legalvision.com.au\/membership\/\" target=\"_blank\" rel=\"noreferrer noopener\">visit our membership page<\/a>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Frequently Asked Questions&nbsp;<\/span><\/h2>\n\n\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1642387538448\"><strong class=\"schema-faq-question\"><strong>What is a limited company?<\/strong><\/strong> <p class=\"schema-faq-answer\">There are two kinds of limited companies: those limited by shares and those limited by guarantee. In both cases, the company\u2019s owners will not be responsible for the company\u2019s debts beyond a certain amount.\u00a0<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1642387549768\"><strong class=\"schema-faq-question\"><strong>What is an unlimited company?<\/strong><\/strong> <p class=\"schema-faq-answer\">This is a company whose owners will ultimately be responsible for the company\u2019s debts. Since the owners do not benefit from the principle of limited liability, it is not a popular option in practice.\u00a0<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1774846985737\"><strong class=\"schema-faq-question\">Why would a business choose an unlimited company?<\/strong> <p class=\"schema-faq-answer\">A business may choose an unlimited company for greater privacy or flexibility. However, it must accept the risk of unlimited personal liability for debts.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1774846995238\"><strong class=\"schema-faq-question\">Are both structures separate legal entities?<\/strong> <p class=\"schema-faq-answer\">Yes, both limited and unlimited companies are separate legal entities. They can own assets, enter contracts and be sued independently from their owners.<\/p> <\/div> <\/div>\n<div class=\"not-prose m-feedback-prompt\">\n    <!-- Thumbs up\/down bar -->\n    <div class=\"m-feedback-prompt__main\">\n        <div class=\"m-feedback-prompt__title\">Was this article helpful?<\/div>\n        <div>\n            <!--span class=\"m-feedback-prompt__button--text\">Thanks!<\/span-->\n            <button type=\"button\" class=\"m-feedback-prompt__button m-feedback-prompt__button--yes\"\n                    data-analytics-link=\"feedback-prompt:yes\" aria-label=\"Agree\">\n                <i class=\"fa-regular fa-thumbs-up fa-3x\"><\/i>\n            <\/button>\n            <button type=\"button\" class=\"m-feedback-prompt__button m-feedback-prompt__button--no\"\n                    data-analytics-link=\"feedback-prompt:no\" aria-label=\"Disagree\">\n                <i class=\"fa-regular fa-thumbs-down fa-3x\"><\/i>\n            <\/button>\n        <\/div>\n    <\/div>\n\n    <!-- Feedback form -->\n    <div class=\"m-feedback-prompt__form\">\n        <div class=\"m-feedback-prompt__form--thanks \">\n            <div>Thanks!<\/div>\n            <p>\n                We appreciate your feedback \u2013 your submission has been successfully received.            <\/p>\n        <\/div>\n        <form id=\"contact-form\" class=\"m-feedback-prompt__form--form\" action=\"\" method=\"post\">\n            <input type=\"hidden\" id=\"authenticity_token\" name=\"authenticity_token\" value=\"9eb4f72322\" \/><input type=\"hidden\" name=\"_wp_http_referer\" value=\"\/api\/wp\/v2\/posts\/1800\" \/>            <input value=\"https:\/\/legalvision.co.uk\/corporations\/limited-vs-unlimited-company\/\" type=\"hidden\" name=\"currenturl\"\n                   id=\"currenturl\">\n            <input value=\"Limited Company vs Unlimited Company in England and Wales\" type=\"hidden\" name=\"currenttitle\"\n                   id=\"currenttitle\">\n            <label>\n                <!-- display on thumbs-up -->\n                <span class=\"m-feedback-prompt__feedback m-feedback-prompt__feedback--yes\">\n                    Can you tell us <span class=\"font-semibold\">why<\/span> you found it helpful?\n                <\/span>\n\n                <!-- display on thumbs-down -->\n                <span class=\"m-feedback-prompt__feedback m-feedback-prompt__feedback--no text-lg\">\n                    How can we better improve this article?\n                <\/span>\n                <textarea name=\"feedbackmessage\" id=\"feedbackmessage\" required><\/textarea>\n            <\/label>\n\n            <div class=\"m-feedback-prompt__form--error\" id=\"form-submit-error\"><\/div>\n            <button id=\"submit-contact-form-button\" type=\"submit\" name=\"commit\" class=\"m-feedback-prompt__form--submit\"\n                    data-analytics-link=\"feedback-prompt:submit\">\n                Submit            <\/button>\n        <\/form>\n    <\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>A limited company restricts shareholders\u2019 liability to their investment, while an unlimited company exposes owners to full personal liability for business debts. For your business, this choice directly affects financial risk, investor confidence and compliance obligations, with limited companies offering protection and credibility, and unlimited companies providing greater privacy but significantly higher personal exposure. You<a href=\"https:\/\/legalvision.co.uk\/corporations\/limited-vs-unlimited-company\/\">Continue reading <span class=\"sr-only\">&#8220;Limited Company vs Unlimited Company in England and Wales&#8221;<\/span><\/a><\/p>\n","protected":false},"author":13461,"featured_media":665,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"","_relevanssi_noindex_reason":"","editor_notices":[],"footnotes":""},"categories":[28],"tags":[99,137,153,385,386,387],"class_list":["post-1800","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-corporations","tag-company-constitution","tag-companies-house","tag-limited-company","tag-unlimited-company","tag-limited-by-shares","tag-limited-by-guarantee"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.1.1 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Limited Company vs Unlimited Company | LegalVision UK<\/title>\n<meta name=\"description\" content=\"When structuring your business as a company, consider that there are both limited and unlimited companies. 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