Limited by Guarantee: Key Questions Answered

A Limited by Guarantee company works much like a standard limited company, with one central difference: it has guarantors instead of shareholders, and no shares to distribute profit through. That single distinction shapes almost everything else about how it's used, most commonly by charities and non-profits.

Key Takeaways

• Limited by Guarantee companies have guarantors, not shareholders, and can't distribute profit as dividends.
• They're popular with charities and non-profits, since there's no share capital to divide up.
• The same annual obligations apply as any limited company: accounts, a Confirmation Statement, and a Corporation Tax return.
• Staff can be paid as normal, but paying directors or members requires a specific clause in the Articles of Association.
• VAT registration rules are identical to a standard limited company, including the current £90,000 threshold.

What's the Key Difference Between a Standard Limited Company and a Limited by Guarantee Company?

It comes down to how liability works if the company is wound up. In a standard limited company, owners only need to cover the value of their shares. In a Limited by Guarantee company, guarantors instead promise a set amount they'll contribute toward the company's debts if it closes.

Since a Limited by Guarantee company has no shares, it can't distribute profit as dividends, which is exactly why it suits charities and non-profits so well. Network Rail is a well-known example. Beyond that structural difference, the two company types work in a very similar way.

Does a Limited by Guarantee Company's Name Have to End in "Ltd"?

Usually, yes, either "Ltd" or "Limited." There's an exception, though: companies formed to promote commerce, art, science, education, religion, charity, or a profession don't need to include either. Oxfam is a well-known example of a company using this exemption.

Does a Limited by Guarantee Company Have to File Annual Accounts?

Yes, the same obligations apply as any limited company: annual accounts and a Confirmation Statement with Companies House, plus a Corporation Tax return with HMRC.

Since November 2025, directors and PSCs also need to complete identity verification with Companies House, which applies to Limited by Guarantee companies the same as any other. Our identity verification service can help with this.

Can a Limited by Guarantee Company Pay People a Salary?

Yes, hired staff can be paid as a normal running expense. Paying directors or members is different, though: this requires a specific clause in the Articles of Association allowing it. Without one, a Limited by Guarantee company can't issue a director's salary the way a standard limited company can, since it has no shares to draw on in the same way.

What Happens if a Guarantor Wants to Leave the Company?

This should be set out in the company's Articles of Association, covering both a guarantor leaving and a new member joining. Typically, this means a departing guarantor giving notice, and a new member being formally appointed at a meeting such as an AGM.

Can a Limited by Guarantee Company Register for VAT?

Yes, the same rules apply as for any business. Registration becomes compulsory once VATable sales cross the current threshold of £90,000 a year, and voluntary registration is available below that if it suits the organisation.

Ready to Form Your Own Limited by Guarantee Company?

Our Limited by Guarantee formation package covers everything above as standard, including identity verification, so there's nothing extra to arrange separately.

FAQs

What's the main difference between a Limited by Guarantee company and a standard limited company?

A Limited by Guarantee company has guarantors instead of shareholders, and can't distribute profits as dividends, which is why it suits charities and non-profits.

Does a Limited by Guarantee company need "Ltd" in its name?

Usually, yes, though companies formed for charitable, educational, or professional purposes can apply for an exemption.

Can a Limited by Guarantee company pay its directors?

Only if its Articles of Association specifically allow it. Hired staff can be paid as normal regardless.

What annual filings does a Limited by Guarantee company need to make?

Annual accounts and a Confirmation Statement with Companies House, and a Corporation Tax return with HMRC, the same as any limited company.

Does a Limited by Guarantee company need to register for VAT?

Only once its VATable sales cross the current £90,000 threshold, though it can register voluntarily before that.

This article is intended to provide general information only. It shouldn't be taken as legal, tax, or professional advice. We always recommend speaking to a qualified professional before making any decisions based on the information here.