5 Reasons a Company Limited by Guarantee Is Ideal for Community Development


A company limited by guarantee is typically a charity or social group. Community projects and outreach programs fall into this category as they do not profit from their actions. These groups take funds raised or donated and apply them to programs, charities, and sustaining the daily operations of running the group. Funds received can be used for office utility costs, office supplies, employee salaries and building lease payments, to name a few acceptable uses for received funding.

Ideal for Philanthropists

Philanthropists have a desire to assist others and expect nothing in return. Companies limited by guarantee (societies, community development programs, and clubs) are ideal business setups for those that wish to make a difference in their local community. Your goal must be clear and you must ensure that every penny received goes back into the organization to prove that no profit was made.

In a community development scenario, a philanthropist may wish to assist needy families with food or clothing. The organization created can work off of donations alone to help feed and clothe those in need. It would be up to the organization to decide what the requirements to receive each service are, but the transfer of money cannot take place to receive the goods.

Limited Liabilities

Companies limited by guarantee are created to serve a specific purpose. For example, if you wish to begin a society to help conserve land or help create barriers to help prevent flooding like the one that exists in London, the Thames Barrier.

An organization and/or its members can run into a snag if wrongdoing occurs. Individuals in companies limited by guarantee can be held financially responsible for embezzling funds, theft and other infractions that cause harm to others or the organization.

An example here would be a company director skimming funds from an organizations bank account for personal ventures.

Personal use of organizational funding that is not written as a scheduled payroll payment can be seen as theft or embezzlement. Personal property can be taken and funding may be required to be repaid if a member of a company limited by guarantee breaks the law.

No Required Shareholders

Since a company limited by guarantee does not turn a profit, it is not required to have shareholders. What it can have is volunteers. Shareholders have financial stake in a company with the intention of receiving additional funds above the initial investment upon selling shares.

Volunteers can assist in the upkeep of the organization’s building, assist with coordinating events, reaching out to the community, and general office tasks. The investment that volunteers make is their time. A volunteer is the most valuable “shareholder” a company limited by guarantee can have as someone’s time is priceless.

Creation of Community Development Organizations

A community development organization is ideal for this business-type setup because it operates on donated and granted funds only. Although the organizations may sell items to help raise funds, it is not profit.

Community development organization type examples include:

  • After school programs for children
  • Community recreational center activities
  • Assisting the elderly
  • Utility assistance payments
  • Medical care assistance funding
  • Providing transportation to disabled persons to appointments
  • Animal rescue organizations

All of these organizations help communities improve. If something is lacking in your local community, consider speaking with others in the area to see if they are in agreement with your need for the type of service in the community.

Ability to Strive to Reach Organization-Related Goals

When you form a company limited by guarantee with a specific goal in mind, you work harder to make sure it is successful. Your ability to reach those goals increases the more you truly believe in what you are doing to improve the local community. Every society in the world has groups of individuals that require assistance in some way. Being able to provide those services and resources to get the necessary help the individuals need brings feelings of accomplishment within you.

Final Word

There are more than just the five reasons listed here to create a company limited by guarantee for community development purposes. Some organizations may be formed just to help clean up a community. Regardless of the service being provided, it will make a difference as you show statistics of community improvement in black and white.

About the Author Staff Writer

Our writers come from all over the world, but one thing unites them - their passion for sustainability.

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