Difference between Inc and Ltd

Key Difference: Incorporated is the forming of a new business, whose legal entity is separate from its owners. Profits and losses are not passed to the owners. A limited company (Ltd) is a company whose liability of the members or subscribers of the company is limited to what they have invested or guaranteed to the company.

In order to do business in any country, state or city, the company must register with the government of the said state and country in order to establish itself as a legal entity. There are various different types in which a company can register to become a legal entity, which includes corporation, incorporated, limited company, public limited company, private limited company, Limited Liability Company, etc. These different types of allow the company to avail different benefits that are offered with the name. Incorporated and Limited are two of these confusing legal terms and are different from each other in many ways.

Incorporated is the forming of a new business, whose legal entity is separate from its owners. Registering under Inc. allows a business to be recognized as a person under the law. The incorporation could be a business, a non-profit organization, sports club, or a government of a new city or town. Incorporated is similar in all aspects to a corporation, however if registered as Inc instead of corporation, all legal documents as well as the name of the company will show Inc. For example MyBusiness Inc. and MyBusiness Corp. are two separate entities and will count as so in all papers, though they are offered the same benefits as well are very similar in nature.

An Inc. is a separate legal entity, which is owned by shareholders. It has legal rights and liabilities, and may work for profit or not for profit. It is usually created with the intention of making profit. The profit is first reinvested in the incorporation and then among the stockholders in the form of dividends, as decided by the president of the corporation. The incorporation is a separate legal entity, and the blame does not fall on the stockholders, but on the corporation itself and possibly on the board of directors. The owners are not directly affected by the profits and losses of the company, which are passed on to the shareholders. In case of dissolution, the company would require approval from the stockholders as well as the government.

A limited company (Ltd) is a company whose liability of the members or subscribers of the company is limited to what they have invested or guaranteed to the company. It is also known as a limited company limited by shares or by guarantee. A company that is limited by shares can also be further divided into public companies and private companies.

Types of a limited company include:

  • Private company limited by guarantee – A company that does not have share capital, but is guaranteed by its members who agree to pay a fixed amount in the event of the company's liquidation. Mainly charitable or non-profit companies.
  • Private company limited by shares – Has shareholders with limited liability and its shares may not be offered to the general public.
  • Public limited company – Public limited companies can be publicly traded on a stock exchange, similar to a corporation.

In a limited company the profits and losses sustained by a company are directly passed on to the members of the owners of the company. A limited company is best suited for big business and corporations.

 

Inc

Ltd

Stands for

Incorporated

Limited Company

What is it

A legal entity which is separate from its owners.

Ltd is a company or business where the liability of the company is limited to what the members have invested in or guaranteed.

Suitable for

Corporations or limited companies.

Big businesses or corporations.

Ownership

Stockholders

Members; however can also be public in a public limited company.

Management Level

Run by a board of directors. Requires the company to appoint company officers.

Must have formally appointed company officers at all times. At least one Director.

Taxation

Corporate tax. Profit and loss are passed onto the company and does not affect the members.

Single taxation (Profit or loss are passed directly to members).

Legal entity

Separate legal entity from owners and shareholders.

Separate legal entity from shareholders.

Regulation of entity name

Incorporated (Inc.) or Corporation.

Ltd or Ltd. or Pvt. Ltd. (private limited) or PLC (public limited company) or Inc. (Incorporated).

Continuity of life

Indefinite term

Indefinite term. It continues to exist even if all its members die or desert it.

Liability

The stockholders are not held responsible in case of a fault, the corporation is.

Limited

Paperwork and records

Paperwork and records are a must as the company has a separate identity. Also profits and losses will be passed onto the company and not members.

Relatively less cumbersome to organize and operate it as it has been exempted from many regulations and restrictions.

Image Courtesy: cami.com, brightscleaners.co.uk

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