We see these terms everywhere in the news, on the back of trucks and on buildings. When you’re starting a new business, these technical terms can only add to the confusion. Therefore, the quick answer is Pty Ltd is for private companies and Ltd is for public companies. However, that isn’t the whole story. Therefore read on to find out what structure your business will use.
Private Company Pty Ltd
The short answer is Pty means proprietary. Likewise, Ltd means limited. Pty is usually associated with private companies which are not listed on the Australian Stock Exchange (ASX). As a Pty structure, there must be less than 50 shareholders who are not employees. There are other requirements about directors, share capital and members. A key point of difference between a private and a public company is that private companies can’t offer shares to the public.
Ltd is a way of signalling to investors what the liability of the company is. A Ltd business has limited liability. For example, a limited by shares structure means, the shareholders are only liable for the amount of money they paid for in shares. The opposite of this would be an unlimited situation. Hence, in the case of unlimited by share capital, an investor will be liable for not just what they invest but the company’s debts as well. A proprietary business which has unlimited liability will just display Pty.
A public company would not be proprietary as they can have thousands of shareholders who are not employees. The clear benefit is a greater access to equity funding for the business. However, the downside is with each new share issued, all existing shareholders have their ownership shrink a bit. A public company can choose to be listed or unlisted on the ASX and generally, they are limited by shares (Ltd). As a public company, you would have to meet higher expectations than Pty Ltd such as reporting requirements and directors duties under the Corporations Act 2001 (Cth).
When you’re starting a company the progression is usually to start private and then go public down the track if it suits. If the company structure seems right for you along with limited liability then register your business now.
Ready to register? Contact a LawPath consultant on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest online Legal Marketplace.