15 Things You Need to Know About Limited by Guarantee

What is a Limited by Guarantee Company?

A limited by guarantee company is a type of legal entity that is not-for-profit and has no shareholders. Instead, it is owned by its members, who are typically volunteers or employees. The members agree to contribute a certain amount of money to the company if it is ever wound up. This amount is known as the "guarantee".

Limited by guarantee companies are often used by charities, social enterprises, and other not-for-profit organizations. They are also used by some businesses that want to limit their liability.

Benefits of a Limited by Guarantee Company

There are a number of benefits to setting up a limited by guarantee company, including:

• Limited liability: The members of a limited by guarantee company are not personally liable for the debts of the company. This means that they cannot be sued for the company's debts if it is wound up.
• Tax benefits: Limited by guarantee companies are exempt from corporation tax. This means that they do not have to pay tax on their profits.
• Flexibility: Limited by guarantee companies can be set up for a variety of purposes. They can be used to run a business, provide a service, or carry out a charitable activity.
• Control: The members of a limited by guarantee company have control over the company. They can elect the directors and make decisions about the company's activities.

Disadvantages of a Limited by Guarantee Company

There are also some disadvantages to setting up a limited by guarantee company, including:

• Cost: Setting up a limited by guarantee company can be more expensive than setting up other types of legal entities.
• Administration: Limited by guarantee companies have to follow certain administrative rules. This can be time-consuming and costly.
• Fundraising: Limited by guarantee companies can find it difficult to raise funds. This is because they do not have shareholders to invest in the company.

Is a Limited by Guarantee Company Right for You?

Whether or not a limited by guarantee company is right for you depends on your individual circumstances. If you are looking for a not-for-profit or charitable organization, then a limited by guarantee company could be a good option. However, if you are looking for a business that is likely to make a profit, then you should consider setting up a different type of legal entity.

10 Common Mistakes to Avoid When Setting Up a Limited by Guarantee Company

Setting up a limited by guarantee company can be a complex process. There are a number of mistakes that you should avoid, including:

1. Not understanding the legal requirements: It is important to understand the legal requirements for setting up a limited by guarantee company. You should consult with a lawyer to make sure that you are following all of the necessary steps.
2. Not having a clear purpose: Before you set up a limited by guarantee company, you should have a clear understanding of its purpose. This will help you to make decisions about the company's structure and activities.
3. Not having a business plan: A business plan is essential for any business, including a limited by guarantee company. The business plan will outline the company's goals, strategies, and financial projections.
4. Not having a good team: The success of a limited by guarantee company depends on the team of people who run it. You should make sure that you have a team of skilled and experienced individuals who are committed to the company's success.
5. Not raising enough funds: It is important to raise enough funds to cover the start-up costs of a limited by guarantee company. You should also make sure that you have enough funds to cover the company's ongoing expenses.
6. Not marketing the company effectively: Once you have set up a limited by guarantee company, you need to market it effectively to potential customers and donors.
7. Not managing the company's finances effectively: The financial management of a limited by guarantee company is essential for its success. You should make sure that you have a sound financial plan in place.
8. Not complying with the legal requirements: It is important to comply with all of the legal requirements that apply to limited by guarantee companies. Failure to do so could result in fines or other penalties.
9. Not taking advice: There are a number of resources available to help you set up and run a limited by guarantee company. You should take advantage of these resources and seek advice from experts when needed.
10. Giving up too easily: Setting up and running a limited by guarantee company can be challenging. However, it is important to persevere and not give up too easily.

By avoiding these common mistakes, you can increase the chances of success for your limited by guarantee company.

10 Tips for Running a Successful Limited by Guarantee Company

Running a successful limited by guarantee company requires hard work, dedication, and a clear understanding of the legal requirements. Here are 10 tips to help you run a successful limited by guarantee company:

1. Set clear goals and objectives: Before you start running your limited by guarantee company, you should set clear goals and objectives. This will help you to focus your efforts and make decisions about the company's activities.
2. Develop a business plan: A business plan is essential for any business, including a limited by guarantee company. The business plan will outline the company's goals, strategies, and financial projections.
3. Build a strong team: The success of a limited by guarantee company depends on the team of people who run it. You should make sure that you have a team of skilled and experienced individuals who are committed to the company's success.
4. Raise enough funds: It is important to raise enough funds to cover the start-up costs of a limited by guarantee company. You should also make sure that you have enough funds to cover the company's ongoing expenses.
5. Market the company effectively: Once you have set up a limited by guarantee company, you need to market it effectively to potential customers and donors.
6. Manage the company's finances effectively: The financial management of a limited by guarantee company is essential for its success. You should make sure that you have a sound financial plan in place.
7. Comply with the legal requirements: It is important to comply with all of the legal requirements that apply to limited by guarantee companies. Failure to do so could result in fines or other penalties.
8. Take advice: There are a number of resources available to help you set up and run a limited by guarantee company. You should take advantage of these resources and seek advice from experts when needed.
9. Be patient: Setting up and running a successful limited by guarantee company takes time and effort. You should be patient and persevere, even when things get tough.
10. Have fun: Running a limited by guarantee company should be enjoyable. Make sure that you are having fun and that you are making a difference in the world.

4 Useful Tables for Limited by Guarantee Companies

The following tables provide some useful information for limited by guarantee companies:

| Table 1: Key Facts About Limited by Guarantee Companies |
|---|---|
| Number of limited by guarantee companies in the UK | 180,000 |
| Total income of limited by guarantee companies in the UK | £30 billion |
| Number of people employed by limited by guarantee companies in the UK | 1 million |
| Percentage of limited by guarantee companies that are charities | 60% |

| Table 2: Advantages and Disadvantages of Limited by Guarantee Companies |
|---|---|
| Advantages | Disadvantages |
| Limited liability | Cost |
| Tax benefits | Administration |
| Flexibility | Fundraising |
| Control | |

| Table 3: 10 Common Mistakes to Avoid When Setting Up a Limited by Guarantee Company |
|---|---|
| Not understanding the legal requirements | Not having a clear purpose |
| Not having a business plan | Not having a good team |
| Not raising enough funds | Not marketing the company effectively |
| Not managing the company's finances effectively | Not complying with the legal requirements |
| Not taking advice | Giving up too easily |

| Table 4: 10 Tips for Running a Successful Limited by Guarantee Company |
|---|---|
| Set clear goals and objectives | Develop a business plan |
| Build a strong team | Raise enough funds |
| Market the company effectively | Manage the company's finances effectively |
| Comply with the legal requirements | Take advice |
| Be patient | Have fun |

Conclusion

Limited by guarantee companies are a useful tool for setting up not-for-profit organizations. They offer a number of advantages, including limited liability, tax benefits, flexibility, and control. However, it is important to be aware of the disadvantages of limited by guarantee companies before setting one up. These disadvantages include the cost, administration, and fundraising challenges.

If you are considering setting up a limited by guarantee company, you should consult with a lawyer to make sure that it is the right legal structure for your organization. You should also develop a business plan and raise enough funds to cover the start-up costs