Company Limited by Guarantee vs Charities

Company limited by guarantee vs charities companies: there are already a number of charitable groups and organisations that have decided to also register as a company limited by guarantee, and this is mainly because a number of differences exist between these two types of company startups. If this is something that you are already considering, whether as an existing charity or a newly formed group, the team of charity companies registration experts at Coddan, can provide all of the necessary advice that you will need to come to a decision. Once this has been taken, we can then put everything in place to process the application for a particular type of company status.

Unfortunately, it can be a costly error to simply assume that a charitable organisation receives the same protection as a company limited by guarantee – the biggest potential difference relates to the overall liability of its members in the event of accrued debts. A company limited by guarantee has the ability to specify a nominal amount that each member will be personally liable for, and this could even be as low as £1. For a company that is set up as a charity, this protection will not be in place, and there is the potential for members to be liable for far more.

On the other hand, if there is not going to be a need to hold a property or any fixed assets in the name of the charity, a charitable company set-up may be the best option – this is particularly useful for smaller organisations as well. Many charities choose to elect governing members on a regular basis, and this ongoing flexibility in the structure is made possible by operating as a charitable company, while there would be extra paperwork involved for a company limited by guarantee. The lack of financial protection from liabilities may also not be an issue for organisations that exist purely to carry out voluntary work or distribute grants.

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