Company limited by guarantee: definition, liability and common uses

Most limited companies in the UK are set up with shares, but if you are starting a charity, club or community organisation, a company limited by guarantee may be a better fit.

Typically used by not-for-profit organisations, this type of company is very similar to a limited by shares company, but with some important differences.

Read our guide to the main UK company types.

Why set up a guarantee company?

A guarantee company is a formal type of business structure which appeals mainly to non-profit organisations, charities, sports clubs, and other bodies where any profits made are usually reinvested for the benefit of the organisation.

• This type of company is set up and run by members, rather than shareholders.
• Forming a limited company provides limited liability for the members who set it up.
• The liability of members is limited to the amount they agree to contribute if the company is wound up. This liability is usually nominal (often £1).
• The amount guaranteed by each member is recorded in the company’s statement of guarantee.
• Funders and partners may be more likely to trust an incorporated company than an unregistered voluntary body.
• Some grant providers and public sector organisations will only work with incorporated entities.

What are the differences between a company limited by shares and one by guarantee?

There are strong similarities between each type of limited company:

• Both are registered at Companies House.
• Members or shareholders normally benefit from limited liability, although there are exceptions, including personal guarantees and certain liabilities arising from wrongdoing or insolvency.
• Both have the same core annual reporting duties, such as filing annual accounts and a Confirmation Statement.
• As separate legal entities, both can enter into contracts, own property, and employ staff.
• Changes that must be reported, such as changes to directors or the registered office, must be notified to Companies House.
• Both must have at least one director.
• Either may appoint a company secretary, though this is not mandatory for private companies.
• The finances of the company are entirely separate from those of its members or shareholders.

However, there are also some key differences:

What types of organisation would use a limited by guarantee company?

• Charities
• Property management companies
• Clubs and associations
• Public sector bodies
• Trade associations
• Research bodies
• Educational and religious institutions

Who can be a guarantor?

A guarantor can be an individual or another organisation. If the company’s constitution allows it, minors can also become members, although a person must be at least 16 to be a company director.

Do companies limited by guarantee pay Corporation Tax?

Being limited by guarantee does not automatically make a company exempt from tax. A guarantee company may still have to pay Corporation Tax on its taxable profits.

A registered charity may benefit from separate tax exemptions and reliefs, but charity status and being a company limited by guarantee are two different things.

How to register a company limited by guarantee

The steps are very similar to forming a company limited by shares.

The current Companies House incorporation fee is £100 online or £124 by post. You can register directly or use a formation agent or accountant if you prefer to delegate the process.

Since 18 November 2025, new directors must verify their identity before incorporating a company or being appointed to an existing company. Existing directors provide their Companies House personal code with the company’s next confirmation statement during the transition period.

Before you start, you will need:

• Your chosen company name, which must be available and meet naming rules. Search the Companies House register.
• A registered office address in the appropriate part of the UK.
• Details of at least one director and one member (this can be the same person).
• Director(s) service addresses.
• Name and service address of a company secretary, if you choose to appoint one.
• Up to four SIC codes to describe the company’s activities.
• Information about any PSCs.
• A statement of guarantee confirming how much each member guarantees (commonly £1).
• Articles of Association. Many guarantee companies use custom Articles to reflect their non-profit aims, although model Articles are available.
• The Memorandum of Association, which is created automatically when you register online.

Companies House provides model Articles for private companies limited by guarantee.

Further resources

• GOV.UK – guarantors and guaranteed amounts
• Companies House model Articles
• Different types of limited companies in the UK