An established company form for a modern organisation

Starting a non-profit company: why choose a company limited by guarantee?

Companies limited by guarantee have a long history. The Companies Act 1862 recognised a company whose members limited their liability by promising an agreed contribution if it was wound up. That gave people another way to establish a company alongside the share-based model. Today, a UK company limited by guarantee (CLG) remains a practical choice when people need an incorporated organisation but do not need owners with shares to buy and sell.

The historical idea still answers a modern question. A sports club, community group, professional association or residents' organisation may need to sign a lease, employ people, receive funding and continue when members change. It can do those things through a company in its own name. Its members can govern it under agreed rules without owning a percentage of it as shareholders.

1. What is a CLG today?

A modern private CLG is registered at Companies House. It is a legal person separate from its directors and members. It has no share capital. Instead of shareholders, it has members called guarantors. Each agrees to contribute a stated sum if the company is wound up in the circumstances covered by the guarantee. A £1 guarantee is common, but the amount should be chosen deliberately. It is not a membership subscription or a payment automatically collected on registration.

The company can own property, hold a bank account subject to a bank's checks, enter contracts, borrow, employ staff and carry on lawful activities. Members normally do not answer for its debts beyond their guarantee merely because they are members. Directors still have legal duties, and a person can have separate liability for their own acts or a personal guarantee they sign.

This is why the guarantee model can work for people organising a lasting activity together. The company gives the group a continuing legal identity; its articles explain how members join, vote and appoint those who run it. A CLG can be small and straightforward, or it can have a more detailed membership and governance structure.

2. What does “non-profit” mean for this company?

Many CLGs are formed so that money earned is used to support the organisation's purpose rather than to pay returns to owners. That does not mean the company must make a loss or cannot charge fees, trade, employ people or build reserves. It means the founders need clear rules about the purpose, use of income, member payments and what happens to assets if the company closes.

Registering a CLG does not by itself create an asset lock, charitable status or a tax exemption. Its articles and any additional charity, community-interest or property rules determine what it may do with its money and assets. If you intend to form a charity or CIC, or the company will manage property under a specific scheme, tell us before ordering so the right documents and registrations can be arranged.

3. Is a CLG the right way to start?

The question is not simply whether the organisation calls itself non-profit. Ask who will participate, whether it needs to sign contracts or hold assets in its own name, and whether it is intended to become a charity or CIC. The answers may point to an ordinary CLG or another company form.

An unincorporated association can also suit some small groups, but its contracts and property arrangements are different from those of an incorporated company. A charitable company and a CIO are not interchangeable merely because both can provide an incorporated charity. The chosen jurisdiction and regulator matter too.

An existing charity may need a separate trading company for activities outside its charitable work. That company can be limited by shares or, where appropriate, by guarantee. Tell us how the charity will control it and what trading it will do; its contracts, tax position and relationship with the charity need to be addressed as part of the setup.

For a closer structural comparison, see company limited by guarantee versus limited by shares. If charitable status is central, explore charitable CLG formation before buying a standard non-charitable package.

4. Begin with the organisation you want to run

Write down the group's purpose in ordinary language. What activity will it carry out? Who is it for? Will it use premises, employ staff, hold land, collect subscriptions, apply for grants or sell services? These answers tell you more about the right structure than the word “non-profit” alone.

Then decide how the organisation will be governed. A small founders' group may want the same people to be directors and members. A wider association may want members to elect a board. A residents' body may need membership tied to particular properties. A charity needs rules suited to its charitable purposes and regulator. Do not assume that one set of standard articles answers all these situations.

If the organisation has a particular purpose, tell Coddan before you order. It is easier to prepare the right company and documents at the outset than to discover after incorporation that its members, purposes or voting rules do not fit.

5. Choose your guarantors and directors

Where there are several people, agree who can approve contracts and spending, who keeps records, and which decisions belong to members rather than directors. A company secretary can be appointed if useful, but an ordinary private company is not required to have one.

6. Identify real control and complete the identity steps

Companies House needs accurate information about people with significant control (PSCs). In a CLG, voting rights, rights to appoint or remove a majority of directors, or other significant influence or control can matter. Do not assume every guarantor is a PSC, or that a group has none simply because there are no shares. Check the actual articles and arrangements.

New directors must meet Companies House identity-verification requirements and provide their personal codes for incorporation. Individual PSCs have their own verification and role-connection requirements. A person who is both a director and PSC should understand both roles. The personal code comes from Companies House after verification; a formation agent does not invent or issue it.

Coddan is a registered authorised corporate service provider (ACSP) and can discuss its supported identity-verification service where required. Check whether the selected formation package includes that work or whether it is separately priced. See CLG director and PSC identity-verification support.

7. Make the articles fit the people and the purpose

The memorandum records the initial subscribers' decision to form the company. The articles are its working rules. They should explain membership, meetings, voting, appointment and removal of directors, and how the company makes decisions. Companies House model articles can be suitable for a straightforward CLG, but they do not automatically provide every organisation's desired objects, membership classes, restrictions on distributions or specialist property rules.

A good practical test is to ask what would happen if a founder left, a new member joined, a grant restricted spending, or members disagreed with the directors. If the articles do not answer the important questions, discuss tailored drafting before filing. A charity, CIC, right-to-manage company or other special-purpose CLG may need different articles and further registration work.

Keep member subscriptions separate from the winding-up guarantee. The first is a possible way to fund the organisation; the second is the member's contingent liability. Write the rules for subscriptions and voting rights clearly if they will be used.

8. Choose a name and registered office

Check that the proposed name can be registered and consider similar names and trade marks. Some words require supporting evidence or consent. A qualifying CLG may be able to omit “Limited” from its registered name, but that is a separate legal test and filing choice, not an automatic benefit of being non-profit.

Choose whether the company will be registered in England and Wales, Scotland or Northern Ireland. It needs an appropriate registered office in its jurisdiction and a registered email address. The office is public and must be able to receive documents so they reach someone acting for the company. Decide who will handle official post from the first day and how directors will receive it.

You can use your own suitable address or an available Coddan registered-office service. Check the location, first-year term, official-post handling and renewal price. A registered office does not automatically include every form of mail forwarding or a place to trade. The registered email is not displayed publicly, but it must remain effective.

9. Plan the money before it arrives

Decide how the organisation will fund its work: subscriptions, donations, grants, trading income, contracts or loans. The legal form alone does not make any of these available. A funder, lender or bank may check the company's purpose, articles, responsible people and records before deciding whether to support it.

If a CLG starts business activity, consider its Corporation Tax position and any required HMRC notifications. VAT registration depends on the taxable activity and applicable rules; it is not granted by Companies House incorporation. If the company is dormant, its HMRC treatment differs, but Companies House filings continue. Charitable tax relief is a separate matter that requires the appropriate charitable status and HMRC recognition.

Before accepting money, decide who can operate the bank account, approve payments, record income, maintain financial records and report to members. Those practical controls make the incorporated company usable, not merely registered.

10. How do you start the CLG with Coddan?

For a straightforward organisation, the process can be simple once the people, purpose, address and articles are settled. Coddan accepts online formation instructions from UK and overseas customers, checks the agreed information and prepares a suitable electronic application. Human review, any required identity work and Companies House approval are separate stages; placing an order is not the act of incorporation.

A complete standard formation normally moves faster than one requiring name consent, tailored articles or further identity evidence. Standard CLG formation normally takes 24–48 hours after complete instructions, subject to Companies House processing. If speed matters, tell us your deadline and what is already ready. We can explain the available filing option, although the certificate cannot be guaranteed by a fixed hour.

11. Compare the real formation price and what you receive

Choose from four Coddan CLG formation packages, from straightforward digital formation to options with a registered office, director service address or broader continuing support. CLGEssential™ is £119.99 + VAT and includes the £100 Companies House standard incorporation fee. Check the package details and total shown when you order; a different address, urgent service or particular documents may change the price.

Ask what the package actually delivers: digital incorporation documents, any printed materials, registered-office term, handling of official post, director service addresses, identity-verification service, articles and support after formation. First board decisions, the member register and any membership certificates should match the CLG's actual structure. Check whether those records are included or separately instructed.

Choose a low-cost starting package when it genuinely fits; choose a wider service when the organisation needs the address or documentation from the outset. You do not need to prepay for every later filing. Coddan can explain any additional work and its price before you instruct us.

Compare the four CLG formation packages

12. What happens when the company has been formed?

Companies House issues the certificate of incorporation when it registers the CLG. Coddan supplies the documents covered by the selected package and any extra documents agreed with you. The certificate proves the company exists; it does not open a bank account, register a charity, grant tax relief or put all its internal decisions on record.

Start with the first practical decisions. Record the directors' appointments and authority, confirm who the members are and how the articles apply, establish a register of members, set up appropriate accounting records, and make sure official correspondence reaches the right person. Keep the registered office and registered email working. Review the PSC position if control changes. A small organisation can do this proportionately, but it should still know who is responsible.

Every company, including a dormant CLG, must file a confirmation statement at least once each 12-month review period; it is normally due within 14 days after that period ends. Companies House accounts are also required. The first accounts are generally due 21 months after incorporation; later private-company accounts are generally due nine months after the accounting reference date. HMRC and, where relevant, charity-regulator deadlines run on their own rules. Directors remain responsible for the company's obligations even when Coddan or an accountant assists.

If you need assistance, see Coddan's CLG secretarial services, including records, changes and annual filing support.

13. Questions before you start

Is every non-profit organisation a CLG?

No. “Non-profit” describes an intended purpose or way of using income, not one compulsory legal structure. A group might use a CLG, a CIO, a CIC, another incorporated form or an unincorporated arrangement, depending on its circumstances.

Does a CLG have to be a registered charity?

No. Many ordinary CLGs are not charities. If the organisation is intended to be charitable, its purposes, articles, trustees, regulator and registration route need specific attention. Company incorporation alone does not confer charitable status.

Can one person start a CLG?

A private CLG can be incorporated with one guarantor and one director, and the same person can hold both roles. A charity, property scheme or wider membership organisation may need more people for its intended governance or separate legal requirements.

Can a CLG trade or pay staff?

Yes, subject to its purposes, articles and any charity or specialist rules. “Non-profit” does not mean no income or no employees. Plan how income is used, who approves payments and which tax and employment requirements apply.

Can founders living overseas form a UK CLG?

UK residence is not generally required merely to be a director or guarantor. The company still needs an appropriate registered office in its UK jurisdiction, accurate people and control details and the required identity verification. Incorporation does not guarantee a bank account, visa or tax outcome.

Can we order online outside office hours?

You can begin the Coddan online order when convenient. The review, any required discussion, identity work and submission follow the service arrangements and readiness of the application. Companies House independently decides registration.

Choose your next step

Ready to start your non-profit company?

If the people, purpose and company form are clear, compare Coddan's CLG packages and order the service that fits. If you need charitable status, unusual membership rules, property provisions or a different structure, tell us before choosing a standard package.

Coddan prepares and submits agreed formation work as a company formation agent. Companies House decides whether to register the company. Charity, tax, banking and other approvals have separate processes.