Guarantee Companies Have the Corporate Status

Guarantee companies are useful for non-profit businesses that require a corporate status: this means that its profits are not distributed to its members but are retained to be used for the purposes of the guarantee company. Of course this does not mean that the guarantee company cannot make a profit, as indeed it is almost paramount that it can and does so. Where an organisation is likely to enter into contracts it may need the benefit of limited liability to protect its board of trustees and its members, who may be involved on a voluntary basis. The following are examples of these contracts: -

A guarantee company provides a clear legal identity. This provides the ability for the non-profit firm to own property in its own name and a democratic structure where its participants are required to adhere to the strict laws and regulations governing limited companies generally.

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The articles can provide for the members to have differing 'shares' of the assets and liabilities. The company limited by guarantee has certain advantages, including that there is no list of members on the annual return, and that control over assets can be achieved without the use of shares; in some jurisdictions, profits realised from such companies are classified as capital gains rather than as income. Specialist advice is required by anyone considering the use of a company limited by guarantee.