What’s The Difference Between Pty And Pty Ltd? (2021 Update)
Pty Ltd is a term used for most private companies which stands for 'proprietary limited'. By contrast, Ltd stands for 'Limited'. Read more here.
Company names often end with the term ‘Pty’ or ‘Pty Ltd’. This is because no matter what you decide to name your company, its legal name must include the status of its liability.
If you’re starting a company, it can be hard to know which one applies. Put simply, Pty Ltd is for private companies and Ltd is for public companies. However, that isn’t the whole story. In this article, we’ll explain what Pty and Pty Ltd mean, and how they apply to different companies.
Table of Contents
- Pty Ltd – definition, advantages, example
- Ltd – definition, advantage, example
- Public Company
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.
Advantages of being a Pty Ltd company
Firstly, many large businesses still choose to be Pty Ltd companies due to the added privacy compared to being Ltd. There are less disclosure obligations and the information only has to go to a small pool of shareholders. Carrying on from this, another advantage is the reduced regulatory burden Pty Ltd companies face. For example, there are a wide range of reports that need to be submitted to both regulators and shareholders for an Ltd company which will be avoided.
James runs a finance-technology startup with 4 employees and registers himself as a company. James would register for the company with the legal structure “Pty Ltd” in his company name to ensure legal obligations are met.
Ltd is a way of signalling to investors what the liability of the company is. A Ltd business has limited liability and would convert from a Pty Ltd company if they listed publicly through an IPO. 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.
Advantages of being an Ltd company
The primary advantage of being an Ltd company is the increased frequency of capital raising and access. Moreover, as stated before, Ltd companies have limited liability and owners are personally culpable for any losses from a financial asset perspective.
James’ finance-technology startup has been operating for over 6 years now and he wants to expand offices overseas. He understands that he needs capital for this and decides to list publicly on the ASX. In doing so, James would need to change his company name to include Ltd as the end suffix.
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, it is common to start out private and then go public down the track. It’s also important to note that you can only use the terms Pty or Pty Ltd if your business is registered as a company. If you have more questions about corporate liability, it may be wise to get in touch with a company lawyer.
Justin is a legal intern at Lawpath as part of the content team. He is currently studying a Bachelor of Laws and a Bachelor of Economics at UTS.