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Forms of company legal entity in the UK: An overview

Sole proprietorship

Also known as a sole trader or an individual entrepreneurship, a sole proprietorship is owned and run by one person, although there may be numerous employees. There is no legal distinction between the owner and the business. The owner retains all the profits from the business and is personally liable for any debts.


General partnership

A basic form of partnership which is created by formal agreement between two or more people who, by default, are jointly and equally liable for any legal actions and debts. Personal assets can be attached and liquidated to pay creditors. Profits are, by default, shared amongst the partners in line with their capital contribution. These conditions may be varied by specific clauses in the partnership contract.

Limited liability partnership (LLP)

In contrast to a simple partnership, a UK LLP is a corporate body and continues to exist independently of its members. Partners manage the business directly. Partners’ financial liability is limited to the amount they invest, and they are not responsible for the negligence or misconduct of others.


When it comes to companies, there are several different legal forms.

Private limited company (Ltd)

There are two forms of private limited company. In private companies limited by shares, shares may not be offered to the general public, and shareholders’ liability is limited to the capital originally invested. In the event of insolvency, money invested by shareholders in the company may be lost, but their personal assets are protected.

Used mainly for non-profit organizations, a private company limited by guarantee normally has no shareholders but members, who act as guarantors and give an undertaking to contribute a nominal, usually very small amount in the event of the company being wound up. Profits may be distributed to members, but the company is then ineligible for charitable status. Both forms must normally include the suffix Ltd in the company name, except where specifically excluded by law.

Public limited company (PLC)

A public limited company is a limited liability company whose shares may be sold and traded to the public. It must have allotted shares to the value of at least 50,000 GBP. A PLC may be listed or unlisted on the stock exchange, and can be privately held, for example by another PLC. An individual’s financial liability is limited to a fixed sum - usually the value of their investment.

Unlimited company (Unltd)

In contrast to a limited company, should an unlimited company go into liquidation, shareholders are responsible for all the outstanding financial liabilities, irrespective of their investment.

Community interest company (CIC)

CICs are social enterprises which use their profits and assets for the public good. Instead of being distributed to shareholders, profits are mainly reinvested to benefit the community. Where profits are reinvested in the company, this is done with the aim of improving the community services they provide. A CIC must be some form of limited company and cannot be a charity or an unincorporated organization.

Charitable incorporated organization (CIO)

A new form of legal entity used by non-profit organizations, the CIO is designed to reduce the bureaucracy involved in operating a charity; in contrast to charities which are set up as limited companies and must register with both Companies House and the Charity Commission, CIOs only have to register with the Charity Commission. As with a limited company, the liability of members and trustees in the event of loss or insolvency is restricted.

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