A Limited by Guarantee (LBG) company is usually best suited for non-profit organisations, such as clubs, associations and memberships. Rather than the company’s turnover going to profits or to shareholders, it is instead re-invested into the company. Any organisation on the Charity Commission must be an LBG company.
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An LBG is a limited company with guarantors instead of shareholders. Any profits made by the company do not go to these guarantors, but instead go towards the company achieving its goals and objectives. The most common use of LBG’s are sports clubs or community projects. A Limited by Guarantee company also provides limited financial liability protection for the owners (guarantors) from financial difficulties.
If an LBG company has a shortfall in its assets upon being wound up, the guarantors will have to put forward a guarantee, a nominal amount, stated in the company’s articles. This can be any amount thought fit, however it is usually £1. It is possible for guarantors to take a share of the profits, however LBG’s are usually used for non-profit organisations so this is not normally applicable.
To start an LBG, you will need: