People might see a business with “LLC” at the end of its name and see a rival business with a very similar structure with “Ltd” after its name. Both are companies that developed in their relevant jurisdictions that must present themselves as either LLC or Ltd. There are, however, major distinctions.
People who run companies might want to structure those companies so that the company’s assets and the individual’s assets are different. This ensures that a corporation’s responsibility does not become the responsibility of the person who owns the company.
The shareholders, called members, form a limited liability company ( LLC) to do this, thus acquiring limited liability. Unlike other business models, the LLC is easy to organize and does not require a board of directors or holding board meetings to be formed.
With regard to this discussion, an LLC is a corporation that offers certain privileges to its shareholders, especially limited liability for personal properties. The members ‘ personal properties are covered from any liability by the LLC.
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Unlike an LLC, a Ltd is not a company or corporate model by itself, or a limited partnership. Alternatively, it is a definition of a company that has investors who have limited liability.
A company that is incorporated as a S or C corporation may have “Ltd” after its name. Both a S company and a C company have shareholders owning equity in the company and have limited liability to those shareholders in which corporate obligations are not subject to the personal assets of shareholders. S and C companies may use the term “Ltd.” due to their status as limited liability companies.
LLCs that are not companies, on the other hand, can not end their names with “Ltd.” An LLC is a company, not a company, since it has no shareholders. State law specifies that “Ltd” is applicable to businesses only.
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The Bottom Line
The words ‘Ltd’ or ‘LLC’ attached to company names are also used in industry. But what exactly do they mean? And how are they applicable to an enterprise’s nature?
Essentially, these two are company forms. The Ltd, which stands for ‘private limited company,’ has limited liability partners and does not sell its shares to the general public. The LLC, or limited liability corporation, also referred to as ‘limited liability’ (WLL), provides its members with limited liability and is subject to pass-through income taxes.
Because of the limitations they placed emphasis on, the two can seem quite confusing. But despite the minor resemblance in name, they are distinctly different from each other and have their own set of benefits and drawbacks.
Partners may opt to tax the LLC as a separate entity or as a partnership-like entity where profits are passed on to partners and their personal income tax returns are taxed. An LLC has a versatile ownership structure, unlike a Ltd; this implies that it can work with as little as one owner or several members from both internal and public circles.