Limited company
Overview
 
A limited company is a company
Company
A company is a form of business organization. It is an association or collection of individual real persons and/or other companies, who each provide some form of capital. This group has a common purpose or focus and an aim of gaining profits. This collection, group or association of persons can be...

 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 share
Share (finance)
A joint stock company divides its capital into units of equal denomination. Each unit is called a share. These units are offered for sale to raise capital. This is termed as issuing shares. A person who buys share/shares of the company is called a shareholder, and by acquiring share or shares in...

s 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.
Encyclopedia
A limited company is a company
Company
A company is a form of business organization. It is an association or collection of individual real persons and/or other companies, who each provide some form of capital. This group has a common purpose or focus and an aim of gaining profits. This collection, group or association of persons can be...

 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 share
Share (finance)
A joint stock company divides its capital into units of equal denomination. Each unit is called a share. These units are offered for sale to raise capital. This is termed as issuing shares. A person who buys share/shares of the company is called a shareholder, and by acquiring share or shares in...

s 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
Aktiengesellschaft
Aktiengesellschaft is a German term that refers to a corporation that is limited by shares, i.e. owned by shareholders, and may be traded on a stock market. The term is used in Germany, Austria and Switzerland...

 (AG), Czech a.s. and the Mexican, French, Polish and Romanian S.A.
S.A. (corporation)
S.A. designates a particular type of corporation in various countries, mostly those employing the civil law. It originated in Spain during the 16th century. Depending on language, the abbreviation stands for various phrases meaning anonymous society, anonymous company, anonymous partnership, or...

), and the "private" types of company (such as the German
German language
German is a West Germanic language, related to and classified alongside English and Dutch. With an estimated 90 – 98 million native speakers, German is one of the world's major languages and is the most widely-spoken first language in the European Union....

 GmbH
Gesellschaft mit beschränkter Haftung
Gesellschaft mit beschränkter Haftung is a type of legal entityvery common in Germany, Austria, Switzerland, and other Central European countries...

, Polish
Polish language
Polish is a language of the Lechitic subgroup of West Slavic languages, used throughout Poland and by Polish minorities in other countries...

 Sp. z o.o., the Czech
Czech language
Czech is a West Slavic language with about 12 million native speakers; it is the majority language in the Czech Republic and spoken by Czechs worldwide. The language was known as Bohemian in English until the late 19th century...

 s.r.o. and Slovak
Slovak language
Slovak , is an Indo-European language that belongs to the West Slavic languages .Slovak is the official language of Slovakia, where it is spoken by 5 million people...

 s.r.o.).

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
Financial Services Authority
The Financial Services Authority is a quasi-judicial body responsible for the regulation of the financial services industry in the United Kingdom. Its board is appointed by the Treasury and the organisation is structured as a company limited by guarantee and owned by the UK government. Its main...

. In Australia, only an unlisted public company can be limited by guarantee.

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.

Public limited company

Public limited companies can be publicly traded
Public company
This is not the same as a Government-owned corporation.A public company or publicly traded company is a limited liability company that offers its securities for sale to the general public, typically through a stock exchange, or through market makers operating in over the counter markets...

 on a stock exchange
Stock exchange
A stock exchange is an entity that provides services for stock brokers and traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and...

 — similar to the U.S.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

 Corporation
Corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...

 (Corp.) and the German
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...

 Aktiengesellschaft
Aktiengesellschaft
Aktiengesellschaft is a German term that refers to a corporation that is limited by shares, i.e. owned by shareholders, and may be traded on a stock market. The term is used in Germany, Austria and Switzerland...

 (AG).

Ireland and the United Kingdom

In the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...

 or Republic of Ireland
Republic of Ireland
Ireland , described as the Republic of Ireland , is a sovereign state in Europe occupying approximately five-sixths of the island of the same name. Its capital is Dublin. Ireland, which had a population of 4.58 million in 2011, is a constitutional republic governed as a parliamentary democracy,...

 it is a corporation
Corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...

 with shareholders whose liability
Limited liability
Limited liability is a concept where by a person's financial liability is limited to a fixed sum, most commonly the value of a person's investment in a company or partnership with limited liability. If a company with limited liability is sued, then the plaintiffs are suing the company, not its...

 is limited by shares
Private company limited by shares
A private company limited by shares, usually called a private limited company , is a type of company incorporated under the laws of England and Wales, Scotland, that of certain Commonwealth countries and the Republic of Ireland...

 (Ltd), which is the most common form of privately held company
Privately held company
A privately held company or close corporation is a business company owned either by non-governmental organizations or by a relatively small number of shareholders or company members which does not offer or trade its company stock to the general public on the stock market exchanges, but rather the...

. Setting up as a limited company is an attractive option for many people as, unlike sole proprietorship
Sole proprietorship
A sole proprietorship, also known as the sole trader or simply a proprietorship, is a type of business entity that is owned and run by one individual and in which there is no legal distinction between the owner and the business. The owner receives all profits and has unlimited responsibility for...

s, personal assets are distinct from company finances.

The registration of companies in Great Britain
Great Britain
Great Britain or Britain is an island situated to the northwest of Continental Europe. It is the ninth largest island in the world, and the largest European island, as well as the largest of the British Isles...

 (England
England
England is a country that is part of the United Kingdom. It shares land borders with Scotland to the north and Wales to the west; the Irish Sea is to the north west, the Celtic Sea to the south west, with the North Sea to the east and the English Channel to the south separating it from continental...

, Scotland
Scotland
Scotland is a country that is part of the United Kingdom. Occupying the northern third of the island of Great Britain, it shares a border with England to the south and is bounded by the North Sea to the east, the Atlantic Ocean to the north and west, and the North Channel and Irish Sea to the...

, and Wales
Wales
Wales is a country that is part of the United Kingdom and the island of Great Britain, bordered by England to its east and the Atlantic Ocean and Irish Sea to its west. It has a population of three million, and a total area of 20,779 km²...

) is done through Companies House
Companies House
Companies House is the United Kingdom Registrar of Companies and is an Executive Agency of the United Kingdom Government Department for Business, Innovation and Skills . All forms of companies are incorporated and registered with Companies House and file specific details as required by the...

. In Canada, a person wishing to register a limited company must file Articles of Incorporation
Articles of Incorporation
The Articles of Incorporation are the primary rules governing the management of a corporation in the United States and Canada, and are filed with a state or other regulatory agency.An equivalent term for LLCs in the United States is the Articles of Organization...

 with either their provincial government or the federal government. Registration of companies in Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...

 is done through the Australian Securities and Investments Commission
Australian Securities and Investments Commission
The Australian Securities & Investments Commission is an independent Australian government body that acts as Australia's corporate regulator...

 (ASIC).

The registration of companies in Northern Ireland
Northern Ireland
Northern Ireland is one of the four countries of the United Kingdom. Situated in the north-east of the island of Ireland, it shares a border with the Republic of Ireland to the south and west...

 has been the responsibility of Department of Enterprise, Trade and Investment
Department of Enterprise, Trade and Investment
The Department of Enterprise, Trade and Investment is a devolved Northern Ireland government department in the Northern Ireland Executive...

. From 1 October 2009 responsibility transfers to Companies House, under the Department for Business Enterprise and Regulatory Reform (BERR).

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
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...

 is the Proprietary Limited company
Proprietary company
A proprietary company is a form of corporation in Australia and South Africa that is either limited or unlimited. However, unlike a public company there are, depending on jurisdiction, restrictions on what they can and cannot do....

 (Pty Ltd). An Australian company with just Limited or Ltd at the end of its name is a public company
Public company
This is not the same as a Government-owned corporation.A public company or publicly traded company is a limited liability company that offers its securities for sale to the general public, typically through a stock exchange, or through market makers operating in over the counter markets...

, such as a company listed on the ASX
Australian Securities Exchange
The Australian Securities Exchange was created by the merger of the Australian Stock Exchange and the Sydney Futures Exchange in July 2006. It is the primary stock exchange group in Australia....

 (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
Insolvency
Insolvency means the inability to pay one's debts as they fall due. Usually used to refer to a business, insolvency refers to the inability of a company to pay off its debts.Business insolvency is defined in two different ways:...

 (equivalent to bankruptcy
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....

 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
Corporate law in the United States
Corporate law in the United States is a collection of over 50 different systems of corporate law, or one law for each state. Two sources of law are, however particularly important: the Model Business Corporation Act , drafted by the American Bar Association was influential and adopted by twenty...

 the expression corporation is preferred to limited company (because corporations there have limited liability). A limited liability company
Limited liability company
A limited liability company is a flexible form of enterprise that blends elements of partnership and corporate structures. It is a legal form of company that provides limited liability to its owners in the vast majority of United States jurisdictions...

 (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

  • Types of business entity
  • Company formation
    Company formation
    Company formation is the term for the process of incorporation of a business in the UK. It is also sometimes referred to as company registration. Under UK company law and most international law a company or corporation is considered a separate entity to the people who own or operate the...

     (UK)
  • Corporation
    Corporation
    A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...

  • Limited liability company
    Limited liability company
    A limited liability company is a flexible form of enterprise that blends elements of partnership and corporate structures. It is a legal form of company that provides limited liability to its owners in the vast majority of United States jurisdictions...

     (LLC) (US)
  • Limited liability partnership
    Limited liability partnership
    A limited liability partnership is a partnership in which some or all partners have limited liability. It therefore exhibits elements of partnerships and corporations. In an LLP one partner is not responsible or liable for another partner's misconduct or negligence. This is an important...

     (LLP) (US)
  • Share capital
    Share capital
    Share capital or issued capital or capital stock refers to the portion of a company's equity that has been obtained by trading stock to a shareholder for cash or an equivalent item of capital value...

  • Unlimited company
    Unlimited Company
    An unlimited company or private unlimited company is a hybrid company incorporated either with or without a share capital but where the liability of the members or shareholders is not limited - that is, its members or shareholders have a joint, several and unlimited obligation to meet any...

  • Yūgen gaisha

External links

  • Limited liability company UK Business Link
    Business Link
    Business Link is a government-funded business advice and guidance service in England. It consists of an online portal managed by HMRC, local/regional advisors and a national helpline.-History:...

  • General information about Limited Liability Companies UK Business Link
    Business Link
    Business Link is a government-funded business advice and guidance service in England. It consists of an online portal managed by HMRC, local/regional advisors and a national helpline.-History:...

The source of this article is wikipedia, the free encyclopedia.  The text of this article is licensed under the GFDL.
 
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