Guarantee Company FAQs

WHAT IS THE DIFFERENCE BETWEEN A GUARANTEE AND A LIMITED COMPANY? 

A Guarantee company does not have shareholders who receive the benefit of the profits. ‘The Guarantors’ just guarantee that they will pay a certain amount to creditors should the company fail.

HOW MUCH IS THE GUARANTEE FOR EACH MEMBER? 

That is up to you, the higher the amount, the higher the guarantee. Most members only give £1 guarantee meaning they are only liable for that amount.

WHAT ARE GUARANTEE COMPANIES USED FOR? 

They are not seen as commercial trading companies and can be charities, members clubs, Associations, or as communal property owners i.e., a block of flats with each owner as a member.

IF NO SHARES ARE ISSUED HOW CAN ANY PROFITS BE TAKEN? 

Directors are still appointed, and they can properly take any expenses, salary, bonuses etc. that the company decides to give them.

CAN A GUARANTEE COMPANY BECOME A CHARITY? 

Yes, many Guarantee companies are formed as charities to raise money from the public to benefit the charity.

CAN A GUARANTEE COMPANY RAISE FUNDS? 

Yes, for example 50 people paying £1000 into a company could then elect to buy a premises for their “club” or “association” to be run from.

DO ANY MEMBERS HAVE DIFFERENT AMOUNTS OF GUARANTEE? 

They can, however we recommend all members guarantee the same amount.

DO ALL MEMBERS HAVE TO GIVE A GUARANTEE? 

No, say an association is formed with 4 original guarantors then it is up to them to decide whether new members become guarantor members or not. An association of 10,000 members may only have a few as actual guarantors.

HOW ARE DIRECTORS APPOINTED? 

By vote of the members, or in a new company the first members may decide to be the first Directors.

Which Type of Limited Company is Right for you?

Limited Companies 

Limited liability can protect the owner of a company from personal loss or even bankruptcy, which a sole trader could not avoid. Take the stress out of making it official and form your company with the National Business Register here.

PLC (Public Limited Companies) 

Owning a PLC offers prestige and perceived status. PLC companies do not have to be listed on the Stock Exchange or Alternative Investment Market and many PLC shareholders/directors choose to retain control over their company at all times. Form your PLC with the National Business Regitser here.

Guarantee Companies 

Guarantee companies are usually run for the benefit of members of a club or association to raise funds for the benefit of others. The “guarantors” give a personal amount they will pay in the event the company fails and owes debts. If they wish, members can give an unlimited guarantee and be responsible for all debts. Can also be used for flat management. Form your guarantee company with the National Business Register here.

LLP (Limited Liability Partnerships) Companies 

An option for companies with two or more owners, the partners can limit their personal liability and avoid putting their personal assets at risk. Mostly used by accounting and law firms. Form your LLP with National Business Regitser here.

CIC (Community Interest Company) 

This is a limited company with extra features to mark it out as a Social Enterprise. CIC’s are easy to set up, with all the flexibility and certainty of the company form, but with some special features to ensure they are working for the benefit of the community rather than private individuals. Form your CIC with National Business Register here.