The set-up of UK unlimited companies is not a very common event, however there are situations where this type of trading vehicle might be appropriate in a specific set of circumstances.
One of the reasons unlimited companies are so rare is that those not requiring limited liability typically opt for sole trader or partnership trading vehicles whilst others who want the prestige of trading as a limited company, also welcome the extra protection of that company being limited.
Potentially, where a business may have numerous owners with differing claims to distributions of profits an unlimited company might be incorporated if the ability to house many shareholders and create share classes with varying rights attached to them is fundamental to their set-up.
Unlimited companies provide this facility and may avoid the more cumbersome agreements which would be required if the business was set-up as a partnership.
Where a start-up business seeks to acquire specific funding and engage with a large supplier or customer, that body might shy away from the company if it has limited liability.
Indeed, the person providing the funding or the large supplier or customer might make any business interactions conditional on the directors ultimately sharing responsibility and relinquishing any limited liability rights.
In such an instance, an unlimited company would provide the required structure.
Unlimited companies are not required to submit annual financial statements to the Registrar of Companies in Cardiff, Wales as other incorporated entities are required to do so.
Unlimited companies can subsequently change their status to that of a limited company.