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What Does Ltd. Really Mean?

written by: •edited by: Michele McDonough•updated: 4/22/2012

Wondering what the "Ltd." that appears after a business name stands for? This abbreviation indicates a unique corporate entity with limited share holder liability.

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    What is the Definition of an Ltd.?

    Ltd Sign, alisdair The "Ltd." after a business name stands for "limited company." In many countries a limited company business entity is a corporation in which the shareholders' financial liability is "limited by shares." It is often regarded as an attractive option for business owners- and is especially popular among those who own smaller companies. One of the most important distinguishing features of a limited company is that personal assets are completely separate from company finances and are therefore untouchable to creditors.

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    What Does "Limited By Shares" Mean?

    "Limited by shares" specifically means that the most a company's shareholders stand to lose in the case of insolvency is the capital they originally invested into it (i.e. the aggregate nominal value of the shares) plus any dividends. Shareholders who only partly paid for their shares are liable for the outstanding amount due to the company.

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    Which Countries Have a Ltd. Business Entity?

    The limited company business structure only exists in certain countries. A Ltd. type of company may be incorporated under the laws of England and Wales, Scotland, the Republic of Ireland, as well as many Commonwealth countries, such as India and Australia.

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    What is the Difference Between an Public Limited Company and a Private Limited Company?

    A limited company may be classified as either "private" (Pvt Ltd.) or "public" (PLC or Ltd.), and there are significant differences between the two forms.

    With a Pvt Ltd, company shares may not be offered to the general public and therefore cannot be traded on a public stock exchange. In this case, the company's share holders usually consist of a close group of friends and relatives and shareholders can not transfer their shares without the consent of other investors. Typically, a Pvt Ltd must have at least two shareholders, and the maximum number of share holders is also limited (usually to around 50 individuals). One major benefit to this private business structure is that the company's disclosure requirements are less stringent than those for a public company.

    The Public Ltd., on the other hand, can raise money by publicly selling shares on the stock market, and share holders of a Public Ltd. company can transfer their shares freely. Like the Pvt Ltd., the Public Ltd. must have a minimum number of share holders, but in this case the number is much higher (usually around 50 individuals) and there is no maximum limit.

    In short, a Private Limited Company is a corporate version of partnership firm where as a Public Ltd. company is a full fledged corporate entity.

    Any business owners who are considering a limited company structure for their ventures should be aware that each country has its own specific laws and regulations regarding the establishment of an Ltd. company and the appropriate government bodies should be consulted for more information. In most cases, a qualified professional should also be consulted.