Inc. vs. Ltd.

B

beatasono

Member
Slovak, Slovakia
Hello,

Can you please explain to me what is a difference between the legal forms of the companies which have Inc. or Ltd. after their business names? Do you think that the American "Inc." is a counterpart to the British abbreviation "Ltd."?Thank you very much.
 
    • If a company is listed on the stock exchange and the shares are freely traded, it is called a corporation in the US and is said to be incorporated. In the UK, it is called a public limited company or PLC.

    Sometimes, a public limited company is called a public company in the UK, which can cause confusion with a public-sector company, i.e. a State-owned entity such as Royal Mail (the postal service, not yet privatized in the UK). It can get more confusing still in that 'a corporation', in the UK, will tend to be a public-sector entity and not a privately owned one (eg BBC = British Broadcasting Corporation).

    Eg IBM Inc.
    Eg BT PLC

    If a company is not listed and quoted on the stock exchange, the shares can only be sold by people 'in the know' on a private basis. This is called a private limited company in the UK or 'limited company'.

    Eg Brown Brothers Limited = Brown Bros Ltd

    You have to differentiate the US from the UK terminology and the status of the company. I don't know what a private limited company is called in the USA.

    PS "Limited" refers to the liability: The shareholders' liability is limited to the corporate assets that they have, i.e. to the shares that they own in the company; if the company goes bankrupt, no one will seize the shareholders' private property (eg home, car, etc.). This is true of both types of company and is the bedrock of modern capitalism, obviously. There are exceptions: Eg Lloyds of London, the re-insurance business, regroups various syndicates; some of the members of some of those (known as 'Names') have unlimited liability...
     
    Short answer: "Limited" is most often, in legal terms, a type of incorporation, one where the liability is limited (the responsibility of the members or owners of the coporation have limited legal responsibility for the actions or responsibilities of the business).
    Thus, corporation is a more inclusive or general term.
    The actual legal details vary from country to country, since each one's legal code defines the various allowed models or types of incorporation allowed.
     
    This is more a research than a language question. A corporation, in the US, may be listed or not. Being listed on a public stock/equities exchange has nothing at all to do with the legal entity. You can incorporate with no intention to ever list shares.

    A corporation limits the personal liability of shareholders. That is true of the many forms of corporate entities in the US.
    Use a search engine to look at LLC, INC, Sub-chapter S and others.

    Equity ownership in any form of incorporated entity may be sold privately as well as on public exchanges.

    As a very vague generality, Inc. and Ltd. are similar.
     
    I'm not a lawyer, but I understand that there are certain words or abbreviations that must be part of a corporation's name to signify its legal nature (primarily limited liaibilty). Where I live, these may include "Company", "Co.", "Incorporated", "Inc.", "Corporation", "Corp.", and I think, "Ltd." But these "magic words" are different elsewhere. For example, "Group" has no special significance in the U.S., but I believe in the U.K., and perhaps throughout Europe, it signifies an entity comprised of at least three corporations.

    So whether the terms are interchangeable depends on where you are.
     
    The difference between a "private limited company" (ltd) and a "public limited company" (PLC or plc) in the UK is very clear. The difference, by the way, is found in other European countries (in France, an 'ltd' is known as 'SARL' and a 'plc' is known as an 'SA'). Liability is limited in both cases. 'Private' and 'public' refers to whether shares are freely traded on the stock market or not.

    Maybe in the US the difference is not made as clearly and/or terminology varies from one state to another. To my knowledge, 'inc' is only used for the equivalent of a British 'plc', but I could be wrong...
     
    James Brandon said:
    The difference between a "private limited company" (ltd) and a "public limited company" (PLC or plc) in the UK is very clear. The difference, by the way, is found in other European countries (in France, an 'ltd' is known as 'SARL' and a 'plc' is known as an 'SA'). Liability is limited in both cases. 'Private' and 'public' refers to whether shares are freely traded on the stock market or not.

    Maybe in the US the difference is not made as clearly and/or terminology varies from one state to another. To my knowledge, 'inc' is only used for the equivalent of a British 'plc', but I could be wrong...
    Click to expand...

    Again, I'm not a lawyer, but I have been told by lawyers that a privately held corporation in the U.S. is allowed to choose at will among the options I listed earlier (except possibly "Ltd."). But it must include one such marker in its name, to identify its status as a corporation. If a non-public corporation is allowed to choose any of these terms, none of them can be reserved for public corporations. And of course, one goal for privately held companies is often to "go public," and in my experience, name changes are not typically involved when that happens.

    So I don't think the kinds of distinctions you discuss for the U.K. are in place in the U.S., which reinforces the notion that where you are will have a lot to do with whether these terms are interchangeable.
     
    LTD - Limited company. A business structure used in Europe and Canada, in which shareholder responsibility for company debt is limited, usually to the amount he/she has invested in the company. In some cases, the liability of shareholders is limited to specific pre-determined amounts (which are stated in a memorandum). Abbreviated Ltd or plc.


    INC. - an organization that operates under a set of articles of incorporation that have been filed with any given state in the U.S.A.; to organize and be granted status as a corporation by following procedures prescribed by the law of the state in which it is incorporated

    (By the way, articles of incorporation by papers filed in any state (Delaware, preferably, because of significant tax breaks) that dictates its officers, shareholder information, etc.)​
     
    I am a bit confused here regarding the American set-up, and if we leave aside British terms, which are clear to me and will be probably be in use in Commonwealth countries, including Canada, to one extent or other (if not the terms, then the concepts).

    -Limited liability: Is liability limited in a US-registered company? I take it that it must be.

    -Incorporation: The definition you give appears to point towards any company or organisation that has statutes and is registered with the authorities of a given state. So far so good. But, how do you (and do you?) make the difference between an entity that is quoted on the stock exchange and one that is not - the latter, typically, a smaller family-run business, for instance? Can any company be an 'Inc.', then?

    In the UK, 'ltd' and 'plc' are not interchangeable at all. Not the same kettle of fish.
     
    James Brandon said:
    But, how do you (and do you?) make the difference between an entity that is quoted on the stock exchange and one that is not - the latter, typically, a smaller family-run business, for instance? Can any company be an 'Inc.', then?

    In the UK, 'ltd' and 'plc' are not interchangeable at all. Not the same kettle of fish.
    Click to expand...

    Again, I'm not an attorney, but I do not believe there is any way to tell whether a company is privately held or publicly traded from its name alone, with the exception of a "Limited Liaibility Company", or "LLC". LLCs are a form of corporation authorized by Congress in the early to mid 1990s, as I recall. An LLC is the corporate equivalent of a partnership, with the company's income flowing directly through to the shareholders' personal income taxes. (An "S" corporation is a longstanding corporate form that does the same thing, but not as well, apparently, because LLCs -- and LLPs, created at the same time for attorneys and other true partnerships -- are all one sees anymore.)

    It's been awhile since I had to review any of this, but when starting a corporation in the U.S., one must signify that it is a corporation, with limited liability, by including one of several terms in its name, but one has the freedom to pick from any of them (LLCs aside). I'm sure these include (or at least, included in 1990) "Company," "Co.," "Incorporated," "Inc.," "Corporation" and "Corp." I believe there was a seventh one, but I no longer recall what it was. Privately held companies "go public" here all the time, and I have never heard of a requirement to change their names as a result (except, of course, that an LLC would have to become a different form of corporation to be publicly held).

    The Securities and Exchange Commission imposes many duties on publicly held corporations that are not required of privately held ones, and the public cannot buy shares in a privately held company in any event. So the system seems to work without doing material harm, although I am not familiar with the advantages that might be lost from not being able to identify whether a company is privately held from its name alone.
     
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