Limited company facts for kids

A limited company is a special type of business where the people who own it (called members or shareholders) are only responsible for the money they have put into the company. This means their personal savings and belongings are usually safe if the company runs into financial trouble. It's like saying, "I'm only risking the money I invested, not everything I own!"

There are two main ways a company can be "limited":

• Limited by shares: Here, owners buy "shares" (small parts of the company). If the company owes money, the owners are only responsible for any unpaid amount on their shares. Usually, shares are fully paid for when bought, so there's no extra money to pay.
• Limited by guarantee: In this type, owners promise to pay a certain amount of money if the company closes down and needs to pay off its debts. This is often used for charities or non-profit groups.

Limited companies can also be divided into two main kinds:

• Public limited companies: Anyone can buy shares in these companies, often on a stock exchange.
• Private limited companies: The rules for who can own shares are much stricter, and shares are not usually sold to the general public.

You can find limited companies in most countries, though the exact rules and names might be different. For example, in Germany, a public company is called an "AG," while a private one is a "GmbH." In the UK, they are "PLC" and "Ltd."

What are the Types of Limited Companies?

Private Company Limited by Guarantee

This type of company doesn't have shares that people buy. Instead, its members (owners) promise to pay a fixed amount of money if the company ever closes down. This form is very common for charities and other non-profit groups. They don't aim to make a profit for shareholders, but rather to achieve a specific goal.

Private Company Limited by Shares

This is the most common type of limited company. It has shareholders whose responsibility is limited to the value of their shares. These companies do not offer their shares for sale to the general public. If a shareholder wants to sell their shares, they usually have to offer them to other existing shareholders first, before selling to someone new.

Public Limited Company

A public limited company is a big business that can sell its shares to anyone on a stock exchange. This means many people can own a small part of the company. In the U.S., a similar type of company is called a "Corporation" (Corp.), and in Germany, it's an "Aktiengesellschaft" (AG).

How Limited Companies Work in Different Countries

Australia

In Australia, a private company is called a "Proprietary Limited company," or "(Pty) Ltd." If a company just has "Limited" or "Ltd" after its name, it's a public company, like one listed on the ASX. If a shareholder in an Australian limited company owes money, they are only responsible for any unpaid amount on their shares.

Brazil

In Brazil, to start a limited company, you work with an accountant. They help you check if the name you want is available and then register your business with the government. Once registered, the company name usually ends with "Ltda."

Canada

In Canada, if you want to start a limited company, you need to file special documents called "Articles of Incorporation" with either your province or the federal government. When you do this, you choose to use "Limited" (Ltd.), "Incorporated" (Inc.), or "Corporation" (Corp.) as part of your company's name.

India

In India, there are three types of limited companies:

• Public limited company: These companies need at least seven members and their name ends with "Limited" (Ltd).
• Private limited company: These companies can have between two and two hundred members. Their name ends with "Private Limited" (Pvt Ltd).
• One-person company (OPC): This is a private company that has only one director and one member. It has fewer rules than other private companies.

In India, if a company is limited by shares, the owners are only responsible for the amount of their shares. If it's limited by guarantee, they are responsible for a set amount they agreed to pay if the company closes. All these companies follow the rules of the Companies Act 2013.

Nigeria

In Nigeria, there are two main types of limited companies:

• A company limited by guarantee.
• A company limited by shares. This type is further divided into a Private limited company (Ltd.) and a Public limited company (Plc.).

In Nigeria, shareholders of limited companies are only responsible for the money they put into the company. All Nigerian companies follow the Companies and Allied Matters Act (CAMA) 1990 and are overseen by the Corporate Affairs Commission (CAC).

South Africa

In South Africa, a private limited company is called a "Proprietary Limited," or "(Pty) Ltd." All companies in South Africa are regulated by the CIPC (Companies and Intellectual Property Commission).

Sri Lanka

In Sri Lanka, businesses can be registered as a Private Limited Company "(Pvt) Ltd," a Public Limited Company "PLC," or a sole proprietorship. Registering as a Private Limited Company offers more security because the company is seen as a separate entity from you. This means your business's money and debts are separate from your personal ones. All companies are registered under the Companies Act, No. 7 of 2007, through the Registrar of Companies in Colombo.

United Kingdom

In the United Kingdom, companies are registered through Companies House. They have offices in London, Cardiff, Edinburgh, and Belfast. The rules for companies in the UK are set by the Companies Act 2006.

United States

In the United States, companies that offer limited responsibility are usually called "corporations." The word "corporation" is more common than "limited company" there. A "limited liability company" (LLC) is a different kind of business structure. Some states allow corporations to use "Ltd." in their name instead of the usual "Inc." (for Incorporated). Corporations must file tax returns with the Internal Revenue Service.

Zimbabwe

In Zimbabwe, "(Pvt) Ltd" refers to a private company where the owners' responsibility is limited by the shares they hold. All private companies are regulated by the Registrar of Companies in Harare.

See also

In Spanish: Sociedad mercantil para niños

• Company formation (UK)
• Limited liability partnership (LLP)
• Share capital
• Types of business entity
• Unlimited company
• Yūgen gaisha
• Privately held company