A company limited by guarantee is a type of business structure where the members' liabilities are limited to the amount they agree to contribute to the company's assets in the event of its dissolution or liquidation. Unlike traditional companies, these entities do not have share capital. They are often established for non-commercial purposes, such as charities, clubs, or community organizations.
This term is primarily used in corporate law and is relevant for organizations that aim to operate without profit motives. Companies limited by guarantee are frequently utilized by non-profit organizations, clubs, and charities. They allow members to participate in the organization without risking personal financial loss beyond their agreed contribution. Users can manage the formation of such companies using legal templates available through services like US Legal Forms.
Here are a couple of examples of abatement:
Example 1: A local sports club forms a company limited by guarantee to manage its activities. Members agree to contribute $100 each to cover any debts if the club dissolves.
Example 2: A charity organization is established as a company limited by guarantee, where members contribute $50 each to ensure the charity can settle any liabilities upon closure. (hypothetical example)
| State | Key Differences |
|---|---|
| California | Specific regulations regarding non-profit status and tax exemptions. |
| New York | Additional requirements for charitable organizations to register with the state. |
| Texas | Less stringent requirements for formation compared to some other states. |
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
| Term | Definition | Key Differences |
|---|---|---|
| Company Limited by Shares | A company where members own shares and their liability is limited to unpaid shares. | Members have ownership rights and can profit from shares. |
| Non-Profit Organization | An organization that operates for a purpose other than making a profit. | Non-profits may not be structured as companies limited by guarantee, but they can be. |
If you are considering forming a company limited by guarantee, start by defining your organization's purpose and structure. You can use legal templates from US Legal Forms to help you draft necessary documents. If your situation is complex, consider consulting a legal professional for tailored advice.
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It is primarily used for non-profit organizations to limit members' financial liability.