KR edition 151

KR-151 : Ltd, Pvt., PLC, LLC!

Hi everyone,

Have you wondered what the Ltd. in a company name means? What is the difference between Pvt. Ltd. and Ltd. What is a LLC and an Inc.?

Expansions:

               Ltd. -> Limited

               Pvt. Ltd. -> Private Limited

               LLC -> Limited Liability Company

               Inc. -> Incorporated

               PLC -> Public Limited Company

Note: These terms are used in different countries and will have slight differences depending on where they are used (but the main term one needs to know is "liability").

• If you remember we've already seen the terms unlimited liability and limited liability. In a sole propreitorship or partnership business the owners have unlimited liability (i.e. they can even end up losing their personal property in case of losses or when facing lawsuits).

• But in a corporation owners reduce the risk of losing personal property.

• Broadly we categorized business into:
  Sole propreitorship, Partnership and Corporation

• You might also come under the category of Limited Liability business under which we can have two categories:
  Private and Public

• A private limited company is one whose stocks are not issued to the general public. They are held by a close knit group of people. These companies will suffix Pvt. Ltd. to their name.

• A public limited company is one which issues stock to the public. The stocks are traded on the market and these companies will suffix Ltd. to their name.

• LLCs and Inc. are similar. Basically these suffixes and types of businesses will vary slightly from country to country depending on the laws of the state. Inc. is used in the US and it denotes that the company is incorporated. LLCs are used in the Middle East and PLC (public limited company) is used in the UK. In India one would find Ltd. and Pvt. Ltd. being used. 

• Incorporation means the creation of a new entity which is different from its owners (i.e. the incorporated firm is considered as a seperate body). Which is why the owners' liability is limited. One might wonder, "why is it said to be limited? anyway, the owners are separate so their personal property is never under risk". It's true to some extent but if some fraud has been committed then they could face unlimited liability!

• Incorporating is a legal process and the owners will have to decide what firm they want to form based on the laws (for example: some states will have the option of LLC and general corporation and each will have its own set of minimum requirements). 

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