Incorporation is the process of creating a company structure – a new legal entity which is distinct from the individuals or shareholders who formed it.
There are actually four main types of limited company in the UK:
1. Private Limited Company (limited by shares)
This is the most popular type of company in the UK, with over one million currently active.
The liability of shareholders is limited to any amount unpaid on the shares they own.
Unlike Public Limited Companies, private limited companies cannot sell their shares to the public.
2. Private Limited Company (limited by guarantee)
This type of company does not have shareholders, just guarantors. The liability of guarantors is limited.
Non-profit organisations such as charities and clubs will typically incorporate in this way.
3. Public Limited Company (PLC)
This business structure is typically used by larger companies, who are able to trade on the stockmarket.
A PLC must have at least 2 directors, and one qualified secretary.
A PLC can only start trading once it has received a trading certificate from Companies House confirming that it has allotted shares to the value of £50,000 or more.
4. Private Unlimited Company
There is also another much rarer option, where there is no limit to the liability of shareholders.
What is a Community Interest Company?
In 2005, the Government launched a new type of limited company aimed at enterprises which want to ensure that their assets can only be used to benefit the community.
A CIC must first be approved by the CIC Regulator, and will be monitored on an ongoing basis to ensure that the enterprise continues to service the community as originally intended.
The incorporation process for a CIC is very similar to that of a limited company, albeit with an extra application form.
A complete guide to incorporation, and company naming can be found on the Companies House site – Guidance GP1.