Types of Limited Companies: Choose the Right Venture

by | Business, Company Formation

Limited Company

We know how much you may hate theory but we really strive to make it all clear. Let’s start with the basics and take a quick look at the important definitions. 

Experts from NSW define a company as “a type of business structure that is a separate legal entity from its owners…with higher set-up and administrative costs because of extra reporting requirements and higher-level legal obligations”. The term “separate legal entity” means that a company can own property in its name, take out loans, sue, be sued, and enter contracts. 

In Ireland, there are several types of companies, most of which are of a limited type. Here we approach another piece of theory. Investopedia gives the following definition for a company:

“a limited company is a general form of incorporation with a limited amount of liability undertaken by the company’s shareholders”

There is a number of limited options available for business owners who want to start their venture in Ireland. These are Private Company Limited by Shares (LTD), Designated Activity Company (DAC), Company Limited by Guarantee (CLG), Public Limited Company (PLC), and Limited Partnership Company (LP). Let’s overview them in a detailed fashion.

Private Company Limited by Shares (LTD)

This is a commonly used business vehicle in Ireland for commercial and private businesses. The shares in LTD are owned by its shareholders. The liability of shareholders is limited by the number of shares they hold. The maximum number of shareholders in Irish LTD is 149. 

This type of limited company can be run by a single director if there’s a separate secretary appointed. If one person holds 100% of shares, this is known as a Single Member Company. 

An LTD company can pass majority special and ordinary written resolutions, claim eligibility for audit exemption, have a constitution instead of a Memo & Arts, and is not obliged to hold an AGM (annual general meeting).

Designated Activity Company (DAC)

A new type of limited company in Ireland came to force due to the New Companies Act 2014. This is an ideal model of a limited company for those who want to strictly outline the specific type of business and responsibilities in their constitution rather than following unlimited powers as the LTD type. A DAC company follows a constitution document incorporated with a memorandum and articles of association. There can be between 1 to 149 members in a Designated Activity Company. 

Just like LTD, a DAC company can pass the majority of written resolutions unless the opposite is outlined in the constitution. Key requirements towards DAC include having authorised share capital, at least two directors and holding an AGM if there are two and more shareholders or members. 

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Company Limited by Guarantee (CLG)

A CLG is a model of company incorporation that is ideal for charity organisations, trade associations, societies, sports and social clubs, non-profit companies and non-governmental organisations. This is a public company with a minimum of seven and a maximum of 99 members. There are no shareholders or share capital in this type of company. Instead of shareholders, there are special people appointed who are obliged to contribute at least 1 euro in case the company is winding up. 

Some significant requirements of CLG are at least two directors, a constitution document with a memorandum and articles of association included. Companies Limited by Guarantee can claim eligibility for audit exemption and dormant company audit exemption.

Public Limited Company (PLC)

PLC model is typically used when a company wants to introduce itself publicly on the stock exchange. A PLC can have an unlimited number of shareholders with a minimum number of 7. Shareholders do not carry any responsibility for the company losses that exceed the sum they paid for shares.

PLC must have at least two directors, a constitution document with a memorandum and articles of association, and unlike previous types of limited companies, CANNOT claim eligibility for audit exemption or dormant company audit exemption.

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Limited Partnership Company (LP)

This is one of the oldest legal frameworks in Ireland. A Limited Partnership Company is not a separate legal entity from its owners. As specified in the legislation, two or more individuals or corporate bodies can form an LP. A Limited Partnership should consist of one general partner, one or more limited partners and not exceed 20 members. The general partner must be a resident of Ireland while limited partners can reside abroad. The general partner is responsible for all debts and obligations of the firm.

To Sum Up

In this article, we approached and explained some relevant definitions related to types of limited companies in Ireland. So, a limited company is the most popular type of business structure in Ireland. When it comes to the type of a limited company to choose from, there are various options. The most popular legal framework and the most beneficial is LTD while LP is the oldest Irish business vehicle. If you’re still experiencing doubts, have unresolved issues, or need help with company registration in Ireland, contact Chern & Co specialists now for a first free private consultation.

Disclaimer: The content of this page is for acquainting purposes only and is subject to change. It does not constitute any professional advice. No liability is accepted by Chern & Co for any actions taken or not taken in reliance on the information set out in this article. Professional, legal or tax advice should be obtained before taking or refraining from any action

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