LLC and LTD are two commonly used abbreviations that appear with business names. LLC stands for Limited Liability Company and Ltd. Stands for a Limited Company. These terms usually denote the capability of a company to conduct business as per the rules and regulations of the state and national government as applicable.
On comparing a LLC and a LTD company, one finds that a Limited Liability Company typically offers more operational tractability and tax efficiencies as compared to a LTD company by the virtue of it being treated as a corporation. A LLC has a structure that is quite similar to a partnership form of business and hence enjoys the associated flexibility that is associated with it. A LLC might contain or consist of one member only, even that member would be considered to be a partner, a distinct entity, separate from the corporation. Typically in such a scenario, the LLC would be required to report its earnings and expenditures using a Schedule C of Form 1040, the similar schedule used by sole proprietors.
The state government’s laws determine the manner in which a LLC gets structured and conducts its business and reports its incomes and expenditures. In most of the cases the incomes from LLC companies are reported as individual incomes and do not attract business or corporate income tax.
The owners or partners who come together to form a LLC are known as members of the Limited Liability Company. The debts of the company so formed, do not extend to the personal earnings, incomes and assets of the members. The risks associated with such a type of company remains limited to the amount of money invested in the Limited Liability Company by the individual partners. A LLC can be taken to court for associated debts and damages, however, the individual owners remain protected, unlike a sole proprietorship, where the individual owner himself remains liable and can be punished by the court of law.
The LLC structure of forming a business is fund to be suitable to small businesses. It involves very little paperwork to be in operation, the annual state report being the only obligatory compliance requirement. These sort of businesses can exist indefinitely.
A LTD or a Limited Company enjoys a similar restriction in liability and protection of the investors in the business.
The owners in this type of a company formation too remains shielded from personal liability. Their liability remains directly proportional to their investment in the business.
A LTD limited company can be further categorized into public and private companies. The various types of Limited company include the following:
- Private Company Limited by Guarantee: In this particular type of a company, the members themselves offer some sort of a guarantee in the event of a liquidation of the firm. Mostly these kinds of organizations are non-profit in nature and the ownership assumed by the members is fixed in nature.
- Private Company Limited by Shares: The shareholding in this particular type of company may be restricted to the members of the company only and may not be available to be traded in the open market. The liability in this kind of a company remains limited to the number and percentage of shares owned by the members.
- Public Limited Company: The shares of this type of a company can be openly traded in the market and are often offered to the general public.
A LTD type of company structure is found to be suitable for large organizations or businesses. These companies have at least one appointed director to manage the operations. Typical size of the group constituting a LTD company could be a minimum of two people, up to a maximum of fifty members.
The incomes accruing from the business or a LTD company is handed over straight to its owners/members, singe taxation is applicable. The company can continue to exist indefinitely even if some or all of the members cease to exist.