Company limited by guarantee: what it is and when to use one

A company limited by guarantee is a company with members instead of shareholders. Each member promises to pay a small fixed amount, usually £1, towards the company’s debts if it is wound up. Because there are no shares and no one to pay dividends to, it is the standard structure for charitable companies, clubs, trade associations and many social enterprises.

What is a company limited by guarantee?

It is a private company where members’ liability is limited to the amount they agree to contribute if the company is wound up. That is the definition in section 3(3) of the Companies Act 2006.

A company limited by shares works differently. There, liability is limited to any amount unpaid on the shares a member holds. A guarantee company has no share capital at all, so members cannot own a slice of it or sell it.

How does the guarantee work?

The guarantee is a promise, not money paid in. Members pay nothing unless the company is wound up and cannot meet its debts.

Section 11 of the Companies Act 2006 requires a statement of guarantee when the company is formed. Each member undertakes to contribute if the company is wound up while they are a member, or within one year after they leave. The contribution covers debts incurred before they left and the costs of winding up, up to the stated amount.

The CIC Regulator’s guidance (updated 4 April 2025) says each guarantor usually guarantees a nominal sum such as £1.

Guarantee or shares: what is the difference?

The main difference is ownership. A share company has owners who can take profits; a guarantee company has members who control it but do not own it.

GOV.UK says a guarantee company needs at least one guarantor, who can be a director. See our guide to share capital if you are comparing the two.

When should you use one?

Use a company limited by guarantee when the organisation exists for a purpose, not to make money for owners. Common uses are:

• charitable companies, which register with both Companies House and, if eligible, the Charity Commission
• community interest companies (CICs), which can be limited by guarantee or by shares
• members’ clubs and societies, such as sports clubs
• trade associations and professional bodies
• residents’ and property management companies for blocks of flats
• community groups that want limited liability for their organisers

Which applies to you?

• If you want to raise investment or pay dividends, choose a company limited by shares.
• If you are a charity, compare a charitable company limited by guarantee with a charitable incorporated organisation (CIO). The Charity Commission says a CIO registers only with the Commission, while a charitable company registers with Companies House too.
• If you are a social enterprise, consider a CIC limited by guarantee. The Regulator says a CIC cannot convert between guarantee and shares once incorporated.
• If you run a club with an informal committee, a guarantee company protects committee members from personal liability for contracts.

How do you set one up?

You set one up at Companies House in the same way as any limited company:

1. Choose a name. Check it is available and follows the naming rules.
2. Appoint at least one director and a registered office address. Directors must verify their identity.
3. Name at least one guarantor and the amount each guarantees.
4. Adopt articles of association. Model articles for guarantee companies exist, or use your own, for example with an asset lock or objects clause.
5. Register online. The fee is £100 online or £124 on paper, per the Companies House fees list updated 25 September 2026.
6. Register for Corporation Tax with HMRC within 3 months of starting any business activity.

Our guide to setting up a limited company walks through the Companies House steps in more detail.

Can it drop ‘Limited’ from its name?

Yes, if it qualifies. Regulation 3 of the 2015 Names Regulations exempts a private company limited by guarantee if:

• its objects are the promotion or regulation of commerce, art, science, education, religion, charity or any profession
• its articles require income to be used to promote those objects
• its articles ban dividends and any return of capital to members
• on winding up, its assets must pass to a body with similar objects or a charity

Claim the exemption on form IN01 when you register, or later with form NE01. The company must still state that it is a limited company in its trading disclosures.

How is it taxed?

A company limited by guarantee is within Corporation Tax like any other company. It files a CT600 Company Tax Return on taxable profits, such as trading with the public, rental income and investment income.

There is one important relief. HMRC’s manual at BIM24015 (updated 4 August 2026) says a mutual trader is not taxed on profits from its mutual trade with members. Income from non-members, property income and chargeable gains stay taxable.

Registered charities can also claim charitable tax reliefs. Not-for-profit status alone does not exempt a company from tax.

What are the ongoing duties?

The filing duties are the same as for a share company. Each year the company must:

• file a confirmation statement, with a £50 online fee
• file annual accounts at Companies House
• file a Company Tax Return if HMRC sends a notice to file
• keep its registers, including people with significant control

A guarantee company that stops trading may qualify as dormant, which simplifies its accounts.

Frequently asked questions

Who owns a company limited by guarantee?

No one owns it in the way shareholders own a company. Its members, also called guarantors, control it through votes at general meetings.

How much do members of a company limited by guarantee pay?

Nothing, unless the company is wound up with debts. Each member is then liable up to the amount they guaranteed, usually £1.

Does a company limited by guarantee pay Corporation Tax?

Yes, on taxable profits. Surpluses from mutual trading with its own members are not taxed, but income from the public, property income and gains are.

Can a company limited by guarantee have shares?

No. Under section 3 of the Companies Act 2006, members’ liability is limited by guarantee instead of by shares. If you need shares later, you would usually form a new company.