The term ‘Ltd.’ is a well-known abbreviation for ‘Limited’ as in ‘Limited Company.’ Though it is commonly used in the names of companies in many countries, it is often misunderstood. Where is this business structure most popular? What are the specific features, benefits, advantages of Ltd. entities compared to other forms of companies? What are the offshore jurisdictions in which registration of your Ltd. can be most favorable?
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What is a Ltd. company?
Ltd. is an abbreviation for ‘Limited’. In Great Britain, for example, the suffix Ltd. indicates that a company bearing it in its name is a corporate structure with one or any number of shareholders who have LImited Liability.
In the broadest interpretation, an Ltd. registered in UK and other English-speaking countries is a private legal entity with
- members’ liabilities (for the debts of the company) limited by the amount of their original contributions/shares in the corporate capital;
- a rather flexible and convenient structure: it does not take much paperwork to get registered;
- rather low benign taxation of the company (taxed separately from its’ members);
- a rather straightforward procedure of ownership transfer (simply sign a share transfer);
- the company’s life is not limited by the lifespan of the owner(s), as it can be passed on to an heir or sold and exist virtually forever until a decision is made to dissolve it.
How about in the United States? There, the word ‘Corporation’ is often preferred to ‘Limited company’. The US company with limited liability, which has been set up in the form of a Corporation usually has the name ending with Corp. or Inc. A USA Ltd company, whether formed as a C or an S corporation, has more formal requirements but still provides limited liability to its shareholders.
Limited companies can be Public (with publicly traded shares that can be bought or sold by anyone). Since the Companies Act 1984 in the UK, Public Limited Companies (Limited companies that can be traded on stock exchanges) are identified as PLC.
Limited companies registered as Ltd. are only privately owned (their shares are either inherited or privately sold). The ‘Private Limited Company’ term is a synonym of ‘Ltd.’ They are the most popular business structures for incorporated small and medium-sized enterprises in the UK.
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Advantages of Limited companies
The limited liability of the shareholders is the main advantage of Limited companies. That is, if you are the owner, you have limited personal liability for the debts of the company if it becomes insolvent, or for any lawsuits against it. Other advantages are as follows.
Second, it is a separate legal entity. If any contracting party enters business relationships with the Limited company, it contracts with the company and not with its individuals (directors or shareholders). The company’s finances are therefore totally separated from the owners’ finances, and the director has limited access to the company’s assets. The director can withdraw funds only for paying the salary, dividends, or loans. It’s important that the Director does not use his company as a personal wallet.
Third, increased flexibility when raising new capital from different sources, such as a bank loan, issuing new shares to existing owners or new investors (however, private Ltds are restricted from offering their shares to the public). In addition, the limited company can be easily sold in future – providing its original owners with an opportunity to receive some financial benefits.
Fourth, there can be only one shareholder (known as a ‘sole member’) or as many as needed. An owner can act as a Director of the company (which is usually the case with very small companies). This provides some commercial protection, especially if the firm owns trademarks, patents, reputation, or a popular brand.
Moreover, the suffix Ltd protects the business name similar to a brand. A name registered to a single active business remains unique in the UK. If a business is registered at Companies House as Ltd, no other entity can take that name and use it to trade.
Finally, there are also certain tax benefits for Ltd companies compared to sole traders.
Where do we recommend to open a Limited company?
The specifics of Ltd. as a form of entity are well-known to lawyers practicing in the British corporate law system. Accordingly, Ltd companies are encouraged to register in the following jurisdictions:
- The United Kingdom and its offshore territories: the Isle of Man, Jersey and Guernsey
- New Zealand
- Singapore, Hong Kong
- The Marshall Islands
- Antigua and Barbuda
- St. Vincent and the Grenadines
- Many other offshore zones.
You are welcome to study our articles about opportunities and services of forming Limited Companies across the world.
Please refer to our experts for assistance and advice when choosing the best offshore jurisdiction. Our colleagues have gained over 15 years of experience in such areas as registration of companies, bank account opening, and resolving different issues at the stage of applications. They can advise you on asset protection, family wealth management, citizenship, etc. You should not delay your decision to contact us. Anyway, you should start with a FREE one-on-one online session with our experts. You can book it by writing to our e-mail address or messengers given at the top of this page.
What is Ltd, how does its meaning differ across the world?
Ltd. is an abbreviation of the term ‘Limited’ = ‘Private Limited Company’. In the UK, the abbreviation Ltd indicates a private limited company whose shareholders or members are liable to the extent of their capital share in case of the company’s debts or bankruptcy. In the United States, the term ‘Corporation’ is preferred to ‘Limited Company’, but these are equivalent entity types regardless of differences in namings. In the UK, the abbreviation ‘Ltd’ following the company name does make a reference to the legal entity type.
Where can I open a Limited company?
The Ltd form of company is common in the British corporate law system. It can be registered in the following jurisdictions:
– The United Kingdom and its offshore territories: the Isle of Man, Jersey and Guernsey
– New Zealand
– Singapore, Hong Kong
– The Marshall Islands
– Antigua and Barbuda
– St. Vincent and the Grenadines
– Many other offshore zones.