The limited company is an organisational structure which gives limited liability to its members. Some sports organisations take on the form of a limited company. However, this is a more accountable form than other company structures, for example, an unincorporated association.

There are two incorporated forms to choose between when setting up as a limited company:

• Company limited by shares (CLS) – shareholders each hold shares in the company. Their liability is limited to the amount unpaid on shares they hold. A public limited company (plc) differs from a CLS in that its shares can be sold to the general public.
• Company limited by guarantee (CLG) – each of the members gives a guarantee for a certain sum that will be put towards the company's finances if the company is wound up. A CLG cannot raise finance by issuing shares, nor pay dividends to its members.

Every limited company is governed by a board that takes overall responsibility for its work. The board is responsible for the governance of the organisation – ensuring it is effectively and properly run and is meeting its overall purposes as set out in its governing document.

Company limited by shares (CLS)

The advatage of a company limited by shares is the shares make it easy for investors to invest in the club.

The issue with shares in a membership organisation is that each time a member joins a share has to be issued to them and each time a member leaves their share has to be transferred to somebody else or redeemed. The shares cannot be advertised and sold publicly. 

A further issue with companies limited by shares for membership organisations is the control that share holders can exert. If anyone holds over 50% of the shares then they will be able to control the board and if they hold 75% of the shares then they are able to change its constitution and have complete control of the company.

For these reasons a more suitable limited company for membership organisations is the limited by guarantee model.

Company limited by guarantee (CLG)

The advantage of a company limited by liability is that the company assumes a separate legal identity. This means if it becomes insolvent or a claim is brought against it then the members will not be liable to other than the amount which each member has guaranteed to pay, typically £1 (unless they have broken company law).

The main drawback to being a company limited by guarantee is the administration required.

This includes filing annual accounts and directors details at Companies House and keeping these details up to date every time a director is appointed or removed.

In addition to this the Directors of the company (the board members) have duties and responsibilities in company law such as:

• the duty to promote the success of the company
• to act in the best interests of the company 
• to comply with its Articles of Association.

Regardless of these drawback, most sports organisations form as a company limited by guarantee because of the protection that the structure gives to members.

Downloads:

Application to register a company.pdf

Application form for setting up a limited company.

Company Formation.pdf

Guiding document to setting up a limited company from companies house.