A company is the term used for a legal entity formed by an individual or a group of individuals to engage in and operate a business with limited personal risk.

It is separate from its owners, meaning it can own assets, incur liabilities and enter contracts in its own name.

A company operates as a structured legal entity that produces goods or services to generate revenue and profit (or work towards a social mission in the case of nonprofit companies). It operates through a system of ownership, management and regulation.

There are many different types of companies with different classifications based on their ownership structure, liability and purpose as well as how they raise capital.

Types of company include Public Limited Company (PLC), Private Company Limited by shares (LTD), a Company Limited by Guarantee, Unlimited Company (Unltd), Limited Liability Partnership (LLP), Quoted companies, Community Interest companies, Industrial and Provident Society (IPS) and a Royal Charter (RC).

Here’s an overview of the different types:

What is a Public Limited Company (PLC)?

A Public Limited Company (PLC) is a typically large or established company that can offer shares to the public, often through a stock exchange.

In the UK they are required to maintain a £50,000 minimum share capital. Any retail investor has the opportunity to buy stock in a PLC.

They offer limited liability to shareholders and are subject to strict regulatory and reporting rules while being more exposed to public scrutiny and potential takeovers. Examples include Tesco plc and BP plc.

Public companies must regularly publish certain financial data and disclosures.

What is a Private Company Limited by Shares (LTD)?

A Private Company Limited by shares (LTD) is the term used for a company that is owned by an individual or small group of shareholders (individuals, families or a small team) whose shares can be publicly traded.
LTDs are often small, startup and medium-sized businesses with limited liabilities, which protects their owners from personal responsibility for business debts.

What is a Company Limited by Guarantee?

A Company Limited by Guarantee is a type of company usually formed for non-profit purposes, such as charities, clubs or social enterprises.

Rather than having shareholders who invest money and take profits, it has members who act as guarantors.

Profits are often reinvested into the company's mission instead of being distributed to members.

This structure is often used by charities, sports clubs, community projects and non-governmental organisations (NGOs).

What is an Unlimited Company (Unltd)?

An Unlimited Company (Unltd) is a type of business where the owners (shareholders) have unlimited liability for the company’s debts and obligations.

If the company cannot pay its debts, its shareholders may have to cover its losses by using their personal assets.

Unltds can still have shareholders and issue shares but there is no requirement for them to publish financial accounts in some jurisdictions, including the UK, offering more privacy.

What is a Limited Liability Partnership (LLP)?

A Limited Liability Partnership (LLP) is a type of partner-managed business that combines features of a partnership and a company, offering the flexibility of a partnership with the limited liability protection of a corporation.

They carry only limited liability for all partners as each partner’s liability is limited to the amount they invest or agree to contribute. Partners are personally liable for their own negligence or misconduct but are generally not personally responsible for business debts or the actions of other partners as an LLP is a separate legal entity.

LLPs are commonly used by law firms, accountancy practices, consultants and architects.

What are Quoted Companies?

A Quoted Company (also known as a publicly traded or listed company) is a company whose shares are listed and actively traded on a stock exchange, such as the London Stock Exchange (LSE) or the New York Stock Exchange (NYSE).

The company's value is determined by the stock market (based on share price), and they are subject to strict regulation and public accountability.

What is a Community Interest Company?

A Community Interest Company (CIC) is a type of non-profit company in the UK created to benefit a community or progress a social purpose, rather than to make profits for shareholders. They blend the flexibility of a company with a clear social mission.

CICs can make a profit, but dividend and interest payments are capped by law, and their profits and assets are protected for community use - they can’t be distributed freely to shareholders or owners.

They can be set up as a company limited by shares or limited by guarantee, offering protection to members or shareholders.

CICs must be approved by the CIC Regulator and file an annual community interest report demonstrating how activities benefit the community.

What is an Industrial and Provident Society (IPS)?

An Industrial and Provident Society (IPS) is a legal structure used in the UK (now largely known as Registered Society) for co-operatives and community benefit organisations.

They are run by and for its members and designed for groups that operate for mutual benefit or for the wider community, rather than for private profit.

Profits are typically shared among members or reinvested in the community.

What is a Royal Charter (RC)?

A Royal Charter is a formal document approved by the Privy Council on behalf of the reigning monarch (e.g., the King in the UK) that grants legal status or rights to an organisation.

It is one of the oldest forms of incorporation in the UK and other Commonwealth countries and it signifies a mark of trust, tradition and national importance.

RC is typically awarded to prestigious institutions that serve the public interest, e.g., the BBC. As such they are only granted in exceptional cases and are difficult to obtain.

Differences between company and corporation

The terms company and corporation are often used interchangeably, despite having distinct meanings depending on the legal context and the country.

In general terms, a company refers to any business entity formed to carry on a commercial enterprise, including partnerships, sole proprietorships and corporations, etc.

Whereas a corporation is a type of company that is a legal entity separate from its owners - often with shareholders and limited liability.

Unlike companies, corporations generally tend to exist indefinitely - they also face more structured and strict governance structures.

Difference between private and public company

Private companies are privately owned and do not sell shares to the public, giving the owners great control. Companies raise capital via venture capital or private investments.

By contrast, a public company is listed on a stock exchange and offers shares to the public, with greater regulatory oversight.

Public companies have more shareholders and are therefore subject to stricter regulatory requirements, but they have the potential to raise capital by issuing shares publicly.

Difference between profit and non-profit company

A profit company aims to generate profits for its owners or shareholders with earnings often distributed as dividends.

Financial gain is a huge operational and strategic priority and driver. Profits can also be reinvested into the company to drive growth.

By contrast, the term corporation is more commonly used in US law and is not a technical term under UK company law. However, in a broader sense, a corporation refers to any entity with legal personality distinct from its members, which would include UK companies, but also public authorities, certain statutory bodies, and other corporate entities.

Choosing the right type of company for your business is crucial as it impacts your liability, tax obligations, funding options and growth potential.

The type of company will depend on your needs and structure but a few things to consider include:

• Your liability needs - this will determine the level of protection affecting your personal assets from business debts.
• Your funding requirements - if you plan to raise capital from investors, a public company (PLC) or a private limited company (LTD) may suit your needs as they can issue shares to investors. Non-profit organisations and cooperatives also have specific funding avenues available to them (grants, donations, memberships).
• Your scale - if you're starting small, an LLC or sole proprietorship allows you to operate with fewer regulatory requirements but may limit your ability to raise large sums of money.
• Tax implications - different company structures offer different flexibility when it comes to tax. E.g. corporations or LLCs may offer more tax flexibility, including potential deductions and tax credits while non-profits enjoy tax-exempt status if they meet specific requirements.
• The level of control you have - different company structures offer different levels of control for founders.
• Your long-term business goals - consider your growth plans and whether they will need external investment. Equally, if social purpose is the main driver, consider an appropriate business.
• Understand the latest regulatory and legal requirements - larger companies (e.g., corporations and public companies) are subject to more rigorous reporting and compliance requirements while LLCs and partnerships have fewer regulatory requirements, making them less complex.