If one person wishes to form a corporation, he or she must first prepare a memorandum of understanding stating the trade name, registered office, purpose of the business, and the individual name of the incorporator. If more than one person agrees to incorporate the company, they must execute a memorandum of understanding with the same content, but must add details on how profits will be distributed and how decisions will be made in the company. By entering into this deed or agreement, the company has been incorporated, but it will only exist once it is registered at Companies House.
Now that we know how to form a company, what does it mean? First, before listing the different types of companies, let\’s discuss a few terms.

Liability

There is limited liability, meaning that you only have obligations to the company up to the amount of your investment, and unlimited liability, meaning that you are liable not only for your investment but also for other assets you own.

Governance

The basic divisions of governance in a company are the supreme body and the statutory body. The supreme body is the body that determines the direction of the company and approves fundamental decisions. The statutory body represents the company and enters into contracts.

Partnerships

Partnerships include V.O.S. – public partnerships and some K.S. – limited partnerships.20]

Capital companies include joint stock companies (a.s.) and limited liability companies (s.r.o.).

Public limited liability companies
In these companies, liability is unlimited and deposits are not compulsory. The owners of the company participate directly in the proceedings. Profits are distributed equally among the owners.

Limited Partnership Companies

Unlimited liability and voluntary deposits are also characteristics of limited partnerships. One of the reasons why it is both a partnership and a limited liability company is that there are two groups of partners: limited partners and unlimited partners. Limited partners join the partnership to increase their deposit by a minimum of SEK 5,000, but are only liable up to the amount of the deposit. General partners are not obligated to make a deposit, but unlike limited partners, they are liable with their entire assets. The limited and general partners together form the supreme body, and only the general partners form the statutory body. Profits are divided half between the limited partners and half between the unlimited partners, and equally between the limited partners and the unlimited partners in proportion to the amount of the limited partners\’ investment.

Limited liability companies

This type is the most common in the world. The liability is only up to the amount of the deposit, and the obligatory amount is only SEK 1. The distribution of profits is governed by the articles of incorporation. The supreme body of this company is called the general meeting, or in the case of a statutory body, the managing director.

Joint Stock Company

What makes this company interesting is that the share capital does not consist of shares, but of shares, which are securities owned by the shareholders. The shareholders participate in the management of the corporation and are entitled to a share of its profits. The corporation is liable for its debts with all its assets, but the shareholders are not liable for the corporation\’s debts. The only risk a shareholder incurs by participating in a corporation is the loss of the value of his shares.