Main Use of Unlimited Company in Business

An unlimited liability company is unusual and not very common type of legal entity, but it does have some specific business uses where its features are advantageous. Unlimited companies are primarily used in specific business scenarios where the benefits of privacy and flexibility outweigh the risk of unlimited personal liability. They are a niche but valuable tool for certain business models.

In many ways, an unlimited company looks just the same as a limited company. Look deeper below the surface, however, and it will become apparent that there are some key differences, which mean an unlimited company can be used in different ways to a limited one.

An unlimited company is ideal for people who want to keep their financial affairs not available for public view.

Financial Privacy:

This is the most significant reason for choosing an Unlimited Company. Under UK law, a private company is required to publish all of its key financial data for the public to see, usually on an annual basis. Unlike limited companies, Unlimited Companies are generally not required to file their financial accounts with Companies House.

This keeps a company's financial performance, profits, and shareholder dividends confidential from competitors, the public, and media scrutiny. As such, unlimited companies have a real advantage, as they do not need to share data with their competitors, though they can see all the competitors' publicly-published data.

Trust and Low-Risk Ventures:

Unlimited Companies are often chosen for businesses that have an extremely low risk of insolvency. The very nature of unlimited liability encourages a high degree of confidence and trust among the owners and provides greater assurance to creditors. Creditors can always lend money with confidence to an unlimited liability company. If your company is at low risk of insolvency, it can be very lucrative.

This can be beneficial for family-owned businesses or holding companies that do not engage in high-risk trading.

In some sectors, it is simply not practical to have a limited company. In cases like these, opting for an unlimited liability company is crucial to succeeding in the market. These are just a few of the numerous financial and logistic uses to which an unlimited, rather than a limited, company can be put.

Flexibility with Capital:

Unlimited Company offer more flexibility in managing share capital and returning it to shareholders. Unlike limited companies, Unlimited Companies are not subject to the same strict regulations under the Companies Act 2006 regarding the reduction of capital, making it easier to move funds within a corporate group structure.

Simpler Administration:

While the formation process is more complex, the ongoing administrative burden for an Unlimited Company can be much simpler. With no need to file public accounts, there is less ongoing compliance and paperwork compared to a limited company.

Trust & Reputation Building:

By choosing an unlimited structure, owners signal confidence and financial strength, since they are willing to risk personal assets. This can help win contracts, especially in industries where credibility is critical.

Unlock the hidden potential of unlimited liability to revolutionise your business strategy. Learn the main uses and distinct features of unlimited companies that can elevate your business approach.

Holding Companies:

Large corporations often use ULCs as a part of their group structure to hold assets or manage specific subsidiaries, allowing them to maintain privacy over a portion of their finances.

Professional Services:

Firms such as law firms, accounting firms, and architectural practices may use a ULC structure when the partners are already personally liable for their actions, and they want to benefit from the confidentiality and administrative ease.

Property and Investment Companies:

Businesses focused on property management or investments, where the risk of business failure is low, may opt for a ULC to keep their financial details private.

Joint Ventures & Special Projects:

In joint ventures where partners already trust each other, an unlimited company may be used for its flexibility and reduced disclosure requirements.

Banking & Financial Sector (Historically):

Some older banks and insurance companies were formed as unlimited companies. The unlimited liability reassured depositors and investors that owners had strong “skin in the game.”