# What Does Ltd. (Limited) Mean After a Business Name?

![Ltd. (Limited)](https://www.investopedia.com/thmb/SwqXXLLUW5H2A_PSL9B4f7T8eBc=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Ltd_Final_4193369-505d3986786c45e08ac38afdf59b1f6c.jpg)

*— Investopedia / Paige McLaughlin*

> **Definition**
>
> Ltd. is a standard abbreviation for "limited," a form of corporate structure available in countries like the U.K., Ireland, and Canada.

## What Is Ltd. (Limited)?

Ltd. is a standard abbreviation for "limited," a corporate structure available in members of the Commonwealth, including the U.K., Ireland, and Canada. The term appears as a suffix that follows the company name, indicating that it is a private or public [limited company](https://www.investopedia.com/terms/l/limited_company.asp). In a limited company, owners' and shareholders' liabilities are limited to the capital they originally invested. If such a company becomes insolvent, the owners' personal assets remain protected because the business is a legal entity and liable for its debts.

### Key Takeaways

*   Ltd. is an abbreviation for "limited" appears as a suffix after the company name
*   "Limited" is a type of corporate structure available to certain countries.
*   Limited companies limit the liability of a corporate loss to the business and do not impact the private assets of owners or investors.
*   Limited companies may be set up as either private or public.

## Understanding Ltd. (Limited)

A limited company is its own legal entity. A private limited company has one or more members, also called shareholders or owners, who buy in through private sales. Directors are company employees who keep up with all administrative tasks and tax filings but do not need to be shareholders.

The company's finances are separate from the owners' finances and are taxed separately. The [company](https://www.investopedia.com/terms/c/company.asp) owns all profits, pays taxes on them, distributes a portion to shareholders as dividends (if applicable), and retains the rest as [working capital](https://www.investopedia.com/terms/w/workingcapital.asp). A director may withdraw funds only for a salary, dividend payment, or loan.

> **Important**
>
> Limited companies are an organizational form that features limited liability, similar to corporations in the U.S.

## How to Set Up a Limited Company

You'll need the following to set up a limited company.

*   A business name and address
*   At least one director and at least one shareholder
*   A memorandum and articles of association (an agreement to create the company and the rules in writing)
*   Names of people who have significant control over the company (people with more than 25% of the shares or [voting rights](https://www.investopedia.com/terms/v/votingright.asp))

Once you have these together, you can then register as a private limited company. 

## Types of Limited Companies

Limited company structures are common worldwide and are codified in many nations, though the regulations governing them can differ widely from one country to the next. For example, in the United Kingdom, there are private limited companies and public limited companies.

Private limited companies are not permitted to offer shares to the public. They are, however, the most popular structures for a small business.

[Public limited companies (PLCs)](https://www.investopedia.com/terms/p/plc.asp) may offer shares to the public to raise capital, though [stock can be unlisted](https://www.investopedia.com/ask/answers/033015/what-are-different-kinds-shares-public-limited-company-plc-can-issue.asp), as well. Those shares may trade on a stock exchange once a total share value threshold is met (at least £50,000). The mandatory use of the PLC abbreviation after the company's name serves to instantly signal that the company is public (and probably fairly large).

They are required to publish details about their financial health so shareholders (current and future) can size up the true worth of the stock and the risks associated with holding it.

> **Fast Fact**
>
> All companies listed on the London Stock Exchange (LSE) are public limited companies (PLCs).

In the United States, a corporation is similar to a limited company, using the suffix Inc. (incorporated) or Corp. (corporation). Some states in the U.S. do permit the use of Ltd. (limited) after a company name.

These designations depend on filing the correct paperwork. Just adding the suffix to a company name does not provide any liability protection. Limited companies in the U.S. are required to file corporate taxes annually with regulators.

[Limited liability companies (LLCs)](https://www.investopedia.com/terms/l/llc.asp) and limited companies have different structures.

Many countries differentiate between public and private limited companies. For example, in Germany, the Aktiengesellschaft (AG) designation is for public limited companies that can sell shares to the public, while GmbH is for private limited companies that cannot issue public shares.

## Strengths of a Limited Company

Because the number of shareholders is unlimited, ownership is spread among multiple owners rather than just one.

Also, shareholders only lose as much as they have invested if the company becomes insolvent.

For example, say a limited company issues 100 shares valued at $150 each. Shareholder A and Shareholder B paid in full for 25 shares each. If the company becomes insolvent, the maximum amount Shareholder A and Shareholder B each lose is $3,750, the value of the 25 shares each member holds.

A limited company has greater tax advantages than a [sole proprietorship](https://www.investopedia.com/terms/s/soleproprietorship.asp), partnership, or similar organization because the owners are not personally responsible for paying taxes—the company, as a legal entity, is. The company continues to exist if an owner sells or transfers their shares as long as it has other shareholders and remains profitable and operational.

## Challenges of a Limited Company

When shares are sold privately, the amount of capital raised might be restricted. This also restricts any opportunity for growth a company might want because the pool of investors is limited. In contrast, offering shares to the public opens up the possibility of much more funding.

The costs for setting up a limited company are generally higher than those of sole traders (in the U.K.) and sole proprietorships (in the U.S.). These entities are small businesses that are only required to register to conduct business, thus incurring much lower costs.

In the U.K., both public and private companies have to file financial statements that are available to the public. This is different to the U.S., where private companies' financial statements are, indeed, private. There are disadvantages to having your company's financial statements publicly available, not least because your competitors can find out a lot about your business. There is some relief from these rules for smaller limited companies in the U.K., which are allowed to file abbreviated accounts that do not show much information.

Running a business as a limited company is a time-consuming process that requires the owners to follow accounting principles, tax filing requirements, administration requirements, and strict employee regulations regarding benefits.

Pros

*   Ownership is diversified among shareholders
    
*   Personal assets are protected
    
*   Potential tax advantages  
    

Cons

*   Privately sold shares limit capital raising
    
*   High starting costs
    
*   Stricter accounting and administrative requirements
    

## Are LLC and Ltd. the Same?

Limited liability companies (LLCs, found in the U.S.) and limited companies (Ltd., found in members of the Commonwealth, including the U.K.) are two different types of business structures.

LLCs are unincorporated business entities, while limited companies are incorporated in their jurisdictions. Key differences in their jurisdictions stipulate the different rules regarding ownership, liability, taxes, and dividends.

## What Are the Pros and Cons of a Limited Liability Company?

The pros of a limited liability company (LLC), which is a U.S.-based legal entity that is different from a limited company, include the protection of personal assets by legally separating the owner's personal assets from their business assets, pass-through taxation, and easier tax filing. The cons include being more costly to set up and maintain than a general partnership or sole proprietorship, more difficult to transfer ownership, and typically higher taxes.

## Why Do Businesses Use Ltd.?

Businesses incorporate themselves as Ltd. (limited) to limit their liability to the capital they invest. If the business cannot pay its liabilities and declares bankruptcy, [creditors](https://www.investopedia.com/terms/c/creditor.asp) can only go after business assets, not the owner's personal assets.

## The Bottom Line

Ltd. (limited) structured corporations provide owners with a degree of financial protection, limiting recourse to only the amount invested in the business while keeping their personal assets safe. This type of abbreviation is commonly used in members of the Commonwealth, including the U.K., and not in the U.S. In the U.S., a similar type of company is an incorporated business.

> **Article Sources**
>
> 1.  Gov.uk. "[Running a Limited Company: Your Responsibilities](https://www.gov.uk/running-a-limited-company/company-and-accounting-records?step-by-step-nav=37e4c035-b25c-4289-b85c-c6d36d11a763)."
>     
> 2.  Gov.uk. "[Set Up a Limited Company: Step by Step](https://www.gov.uk/set-up-limited-company)."
>     
> 3.  Legislation.gov.uk. "[Companies Act 2006](https://www.legislation.gov.uk/ukpga/2006/46/section/58)."
>     
> 4.  NIBusinessInfo.co.uk. "[Legal Structures for Businesses - An Overview](https://www.nibusinessinfo.co.uk/content/starting-public-limited-company)."
>     
> 5.  London Stock Exchange. "[UK and European Securities](https://www.londonstockexchange.com/equities-trading/asset-classes/shares-trading/uk-and-european-securities)."
>     
> 6.  Internal Revenue Service. "[Instructions for Form 1120](https://www.irs.gov/pub/irs-pdf/i1120.pdf)," Page 2.