6 Types of Companies

7/26/2019 6 Types of Companies

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What's the difference of Co, Pty, Ltd, Inc, and so on?

Best Answer: Ltd is a company limited by shares, but older companies used this abbreviation for

all limited companies, such as Limited Liability Partnerships(LLP), Limited Liability

Companies(LLC), Limited Partnerships (LP).

Co. is simply a company which can be any business , in fact, all of the thins you are as!in

about can be called companies.

Corp. is a company owned by many people or roups.

Pty. means indicates that a party, or proprietor, e"ercises private ownership, control or use over

an item of property, usually to the e"clusion of other parties.

#nc. is $uite comple" and can be $uite similar to a corporation or can be a non%profit

&here are also 'L means not limited and some common forein abbreviations are A

(A!tienesellschaft % erman: stoc! corporation), mb* (esellschaft mit beschr+n!ter

*aftun % erman: Company with limited liability), .A. (ociedade An-nima, Portuuese:

anonymous society toc! Corporation), .r.l (societ/ a responsabilit/ limitata) % #talian:limited liability Company, .p. A. (ociet/ per A0ioni) % #talian: hares%based Company, and

PLC after a 12 or #rish company name indicate that it is a public limited company, a type of

limited company whose shares may be offered for sale to the public. (&he e$uivalent term in the

1nited tates is Public company)

Six different types of public and proprietary companies

James

Following on from my blog on company characteristics, I thought I would write a quickblog on the different types of companies that are common today.

Companies are classified accordin to liability, si0e and where they are listed. 3e will discuss the

first two and the resultin 4 common types of companies we arrive at.

Classification according to member liability

1 Companies limited by shares(!nown as 5limited liability6 companies)

&ypically, members are usually shareholders and their liability is limited to the nominal (nominal

capital is defined as the capital with which the company was incorporated) value of their shares

plus any unpaid amount on their shares.

As an e"ample, say you buy B*P shares at 789 for 899 shares, then your liability is limited so

that if B*P were to be sued, it is limited to the 789 paid. &his is sometimes conducted differently

when you don6t fully pay for shares when the company floats. #f 7 was paid and 7 was then

owed on the shares, then the remainin amount must be contributed should it be called upon.

As we probably !now by now, the sinificance is that shareholders are not liable for the full

amount. &his is !nown as the share capital method of corporate finance. Another method is by

debt ; oin to a ban! and as!in for money to be lent. &his is a different contractual areement.


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2 Companies limited by guarantee (small and charitable oranisations)

&he difference with these companies is that members can place a uarantee on the company

which may only be enforced on the windin up of the company and is not an asset of the

company which may be chared durin its life. &hese companies have no share capital unli!e

companies limited by shares.

> 12

Act. #t is defined in Australia in the corporations actas a company whose members have no limit

placed on their individual liability to contribute to the debts of the company.

&he ole advantae is that this company is e"empt from the prohibition on reduction of capital(s?=A) which means money can be more freely ta!en out of the company6s capital base. &he

clear disadvantae is that members miht not be aware of their unlimited personal liability when

@oinin.

&oday the unlimited liability company is used mainly by professional oranisations carried on in a

partnership li!e many Leal and Accountin firms.

" #o liability companies ("clusively minin and resource companies)

#n Australia, companies may only be reistered as no liability where

a) the company has share capital,

b) the company6s constitution states that its sole ob@ects are minin purposes and,

c) the company has no contractual riht under its constitution to recover calls made on its shares

from a shareholder who fails to pay them s88?(?).

s88?(?) of Corporations Act says constitution must state that the sole ob@ect is minin

purposes.


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Both proprietary and private companies e"ist:

1 %roprietary Companies

A proprietary company must:

a) be limited by shares (8 above) or be an unlimited company ( above) with a share capital

b) have no more than 9 non%employee members

c) not do anythin that would re$uire the issue of a prospectus (prohibition on see!in

investment from the public).

#f a company doesn6t $ualify as a proprietary company, then it6s a public company and must

comply with all the reulatory re$uirements associated with that. &he minimum number of

persons is one (shareholder and director).

2 %ublic Companies

As above, if a company doesn6t $ualify as a proprietary company, then it6s a public company. A

public company must have a minimum of directors, ? of whom must ordinarily reside in

Australia.

*owever, many enterprises structured themselves so that they @ust met the definition of a

proprietary company to avoid reulatory provisions. &he overnment then redefined the

proprietary company definition in s>A(?) of Corporations Act. &he act now identifies smaller

companies on the basis of value and si0e of the business.

A proprietary company is small if it satisfies ? of the followin criteria:

a) the consolidated ross operatin revenue of the financial year of the company and any entities

it controls is less than 789m

b) the value of the consolidated ross assets at the end of the financial year of the company and

the entities it controls (if any) is less than 7m

c) the company and any entities it controls have fewer than 9 employees.

& classifications of companies

After all this, we arrive at the followin possible combinations of different companies with the

proprietary limited (5pty ltd6) company bein the most prevalent.

Proprietary companies 1 Limited by shares 98.2%


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(no more than 50 non-employee

shareholders)

3 Unlimited with share capital

Public companies

(all non-proprietary companies: s9

definition of public company)

1 Limited by shares 0.7%

2 Limited by garantee

3 Unlimited with share capital

! "# liability c#mpany (mining

only) 0.09%

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6 Types of Companies