What Does LTD Mean After a Business Name?

The abbreviation LTD or Ltd. stands for “limited company.” The name is attached to businesses operating in the United Kingdom, Canada and many Commonwealth countries. The designation’s regulations vary between countries, but in the United Kingdom an LTD refers to a privately held limited company.

Much like a limited liability company, or LLC, in the United States, limited companies enjoy certain liability and tax benefits. Gaining a limited company designation in the United Kingdom also often projects a company as more reliable business partner to larger businesses and organizations.

Designations of Limited Companies

Private limited companies are organized in the United Kingdom in three different ways.

  1. Private companies that are limited by shares are owned by shareholders. Each member’s liability is limited to the amount of unpaid shares he holds. 
  2. Private companies that are limited by guarantee do not have shareholders. Their liability is limited to the money or capital that the principals contributed to the business. Charities often organize with this structure. 
  3. Private companies described as unlimited don’t necessarily have a share capital, and its members do not have liability.

Limited Owner Liability

Much like a limited liability company in the United States, a limited company is a separate legal entity from its owners. The organization shields them from liability. In the event a company gets into financial trouble or declares bankruptcy, its owners are not personally liable for the debt. The company’s shareholders are also not liable, unless they are holding unpaid shares.

Income Tax Benefits

In the United Kingdom, a limited company has several tax benefits. Just like a sole trader or partnership, a limited company’s director must pay income tax. Businesses must also create a pay-as-you-earn system to pay the income tax and National Insurance contributions from its employees.

The company’s profits, both earned and retained, are subject to the corporation tax, which has a much lower rate than income taxes. Additionally, they receive a capital gains tax-free allowance.

Organization Requirements and Restrictions

Limited companies are required to have a director and a secretary. One person cannot fill both roles. An outside party can be hired to perform the secretarial duties. The director and secretary are the company’s directors, and must honorably represent the shareholders.

No restrictions exist on when a company must begin trading shares, but employees can buy into the company to become shareholders. Outside investors also can buy shares.

Exist into Perpetuity

Limited companies do not dissolve with the death or resignation of partner. The company’s structure stays the same, and shares from the former partner may be passed to existing partners. The name of the company and similar names also are protected by law.