Unlimited company not for you? Form a limited company today - from only \u00a351.99<\/span><\/a>\n \nWhat are the benefits of an unlimited company?<\/h3>\n Despite the lack of any limit to liability for its members, there are some notable benefits of unlimited companies:<\/p>\n
\nConfidentiality<\/strong> – unlimited companies are generally exempt from the requirement to file annual accounts with Companies House*. As such, they are able to keep their financial affairs private which can provide an advantage if they do not wish to disclose their finances, e.g., turnover and the amounts paid in dividends to their competitors, etc. Furthermore, shareholder dividends can remain private, which may be attractive to members.<\/li>\nSimplicity<\/strong> – restrictions on return of capital, and return of capital to shareholders, which are contained in the Companies Act 2006 do not apply to unlimited companies. As such, capital can be moved more freely, e.g., between associate companies, compared to limited companies.<\/li>\nHistory<\/strong> – in some cases, companies which have a long family history will be able to promote their values of family succession and low risk approach by not limiting their liability, e.g., C. Hoare & Co. (see above).<\/li>\nConfidence<\/strong> – since its members have far greater personal exposure to the financial risks of business failures, third parties, e.g., clients and creditors may perceive an unlimited company as being at lower risk of insolvency. Although unlimited companies will normally have sufficient reserves of capital and are unlikely to rely on credit, this potentially makes it easier for them to obtain credit if required.<\/li>\nPrudence<\/strong> – directors and executive management may adopt a more risk-averse approach to business decisions, since members often have far more at stake than in a limited company.<\/li>\n<\/ul>\n*An unlimited company is still required to file annual accounts with Companies House if it is:<\/p>\n
\nthe parent company of a limited company<\/li>\n a subsidiary of a limited company<\/li>\n involved in certain activities such as banking and insurance<\/li>\n<\/ul>\n What is the right company structure for my business?<\/span><\/a>\n \nWhat are the risks of operating an unlimited company?<\/h3>\n There are several drawbacks to forming an unlimited company, some more obvious than others:<\/p>\n
\nLiability<\/strong> – the biggest risk of an unlimited liability company is evident in its name. Shareholders are heavily exposed to the full extent of any financial fallout in the case of company insolvency and are personally responsible for repayment of creditors. As such, it may be difficult to attract directors and shareholders.<\/li>\nCarefulness<\/strong> – although being more risk-averse can be viewed as beneficial to unlimited companies on the one hand, on the other hand being too cautious can impact the risk-reward aspect of running a business. Opportunities may be missed if the company always avoids risky ventures.<\/li>\nTransparency<\/strong> – in a world where transparency is increasingly seen as a positive trait, not filing annual accounts may be viewed with a degree of suspicion by potential clients and partners. As such, the confidentiality of financial affairs can be a double edged sword.<\/li>\nPersonal guarantees<\/strong> – although unlimited companies are seen as more risk-averse, lenders may be more inclined to investigate the solvency of each shareholder and are potentially more likely to ask them for personal guarantees, etc.<\/li>\nUnknowns<\/strong> – because there are hardly any unlimited companies in existence, they are a virtual unknown in the wider business community; it may be necessary to explain the reasons for operating an unlimited company to potential investors and partners, etc.<\/li>\n<\/ul>\nWho usually forms an unlimited company?<\/h3>\n This type of business structure is unusual but, as has been outlined above, there are certain benefits to forming an unlimited company. It would normally be suitable for a business that wishes to keep its company accounts private and which has a very low (or ideally no) risk of insolvency.<\/p>\n
In terms of financial risk, an unlimited company is similar to a sole trader or partnership, and it may be a suitable option for a sole trader or partnership that is not worried about liability, but would nevertheless like to trade as a corporate entity.<\/p>\n How do I get a company VAT number?<\/span><\/a>\n \nHow do I form an unlimited company?<\/h3>\n The process of setting up a private unlimited company is much the same as for a private limited company. It must be registered with Companies House in line with the Companies Act 2006; this process is known as\u00a0 incorporation and involves:<\/p>\n
\nChoosing a company name – although this must comply with the general company name rules<\/a>, there is no requirement to use the term \u2018Unlimited\u2019 after the official name, i.e., as compared to the general requirement to affix \u2018Limited\u2019 or \u2018Ltd\u2019 in the case of limited companies.<\/li>\nChoose directors and company secretary – there must be at least one director but a company secretary is optional.<\/li>\n Designate the shareholders – there must be at least one (who can also be the director). As with a private limited company, there is no minimum capital requirement to register a private unlimited company.<\/li>\n Identify people with significant control (PSC).<\/li>\n Prepare a memorandum of association and articles of association. However, there are no specific model articles provided for unlimited companies. As per government guidance<\/a>, articles \u201cmust not include the provision for the liability of the members to be limited and the members should consider including an article containing power for an unlimited company by special resolution to increase or consolidate share capital, subdivide or cancel shares or reduce share capital and any share premium account.<\/em>\u201d<\/li>\nCheck what records the company needs to keep. Although annual accounts do not need to be filed with Companies House, accounts still need to be kept for tax purposes.<\/li>\n Register the company. This can be done online when registering a limited company – but in the case of unlimited companies, registration must be filed using paper (PDF) form IN01<\/a>.<\/li>\n<\/ul>\nRe-register an unlimited company as a limited company<\/h3>\n Under section 105 of the Companies Act<\/a>, a company which has initially been registered as an unlimited company can later be re-registered as a limited company<\/a>, as long as:<\/p>\n\nA special resolution has been passed agreeing that the company will be re-registered as a limited company by shares or guarantee.<\/li>\n The company has not previously been re-registered, i.e., gone from being a limited company to an unlimited company.<\/li>\n The company makes any relevant changes to its name and articles.<\/li>\n An application for re-registration is delivered to Companies House in accordance with section 106 of the Companies Act.<\/li>\n<\/ul>\nIt is similarly possible to re-register a limited company as an unlimited company<\/a> if all the members of the company have assented and the company has not been previously re-registered, i.e., gone from being an unlimited company to a limited company. Sections 102 – 104 of the Companies Act<\/a> deals with this type of re-registration.<\/p>\n What happens after you set up a company?<\/span><\/a>\n \n"},"excerpt":{"rendered":"Unlimited companies are registered at Companies House and share many attributes of private limited companies, such as having members\/shareholders and directors. However, the defining aspect of an unlimited company is that its shareholders are jointly and severally liable for the company\u2019s debts in the event that it becomes insolvent. The fact that there is no…<\/p>\n","protected":false},"author":10,"featured_media":6930,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false},"categories":[1231],"tags":[],"class_list":["post-7014","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-company-formation","category-1231","description-off"],"acf":[],"yoast_head":"\n
What is an unlimited company?<\/title>\n \n \n \n \n \n \n \n \n \n \n \n \n\t \n\t \n\t \n \n \n\t \n\t \n\t \n","yoast_head_json":{"title":"What is an unlimited company?","description":"By definition, an unlimited company places unlimited liability for its debts upon its members. We discuss the risks and benefits of an unlimited company.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.qualitycompanyformations.co.uk\/blog\/unlimited-company\/","og_locale":"en_GB","og_type":"article","og_title":"What is an unlimited company?","og_description":"By definition, an unlimited company places unlimited liability for its debts upon its members. 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