Limited company


Limited company

A limited company is a company in which the liability of the members or subscribers of the company is limited to what they have invested or guaranteed to the company. Limited companies may be limited by shares or by guarantee. And the former of these, a limited company limited by shares, may be further divided into public companies and private companies. Who may become a member of a private limited company is restricted by law and by the company's rules. In contrast anyone may buy shares in a public limited company.

Limited companies can be found in most countries, although the detailed rules governing them vary widely. It is also common for a distinction to be made between the publicly tradable companies of plc type (for example, the German Aktiengesellschaft (AG), Czech a.s. and the Mexican, French, Polish and Romanian S.A.), and the "private" types of company (such as the German GmbH, Polish Sp. z o.o., the Czech s.r.o. and Slovak s.r.o.).

Contents

Kinds

Private company limited by guarantee

A company that does not have share capital, but is guaranteed by its members who agree to pay a fixed amount in the event of the company's liquidation. Charitable organisations often incorporate using this form of limited liability. Another example is the Financial Services Authority. In Australia, only an unlisted public company can be limited by guarantee.[1]

Private company limited by shares

Has shareholders with limited liability and its shares may not be offered to the general public. Shareholders of private companies limited by shares are often bound to offer the shares to their fellow shareholders prior to selling them to a third party.[2]

Public limited company

Public limited companies can be publicly traded on a stock exchange — similar to the U.S. Corporation (Corp.) and the German Aktiengesellschaft (AG).

In specific countries

Ireland and the United Kingdom

In the United Kingdom or Republic of Ireland it is a corporation with shareholders whose liability is limited by shares (Ltd), which is the most common form of privately held company. Setting up as a limited company is an attractive option for many people as, unlike sole proprietorships, personal assets are distinct from company finances.

The registration of companies in Great Britain (England, Scotland, and Wales) is done through Companies House. In Canada, a person wishing to register a limited company must file Articles of Incorporation with either their provincial government or the federal government.[3] Registration of companies in Australia is done through the Australian Securities and Investments Commission (ASIC).[4]

The registration of companies in Northern Ireland has been the responsibility of Department of Enterprise, Trade and Investment. From 1 October 2009 responsibility transfers to Companies House, under the Department for Business Enterprise and Regulatory Reform (BERR).[5]

Northern Ireland will retain a registry function and presence along similar lines to the Companies House Scotland model. This means that the office will remain in Belfast and it will retain the Registrar for Northern Ireland.

Australia

The private company equivalent in Australia is the Proprietary Limited company (Pty Ltd). An Australian company with just Limited or Ltd at the end of its name is a public company, such as a company listed on the ASX (although public companies can be, and often are, unlisted). Australia does not have a direct equivalent to the plc.

A shareholder in a limited company, in the event of its becoming insolvent (equivalent to bankruptcy in the U.S.) would be liable to contribute the amount remaining unpaid on the shares (usually zero, as most shares are issued fully paid). 'Paid' here relates to the amount paid to the company for the shares on first issue, and not to be confused with amounts paid by one shareholder to another to transfer ownership of shares between them. A shareholder is thus afforded limited liability.

United States

In United States the expression corporation is preferred to limited company (because corporations there have limited liability). A limited liability company (LLC) is a different entity. However, some states permit corporations to have the designation Ltd. (instead of the usual Inc.) to signify their corporate status.

See also

References

External links


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