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Difference Between Inc and Ltd

inc_corporationInc vs Ltd

When a company would like to begin its operation, it must decide between the different types of business models available. The business model is essential to ensure positive growth for the company. The two common business models are Inc and Ltd. Although there are only a few differences between these two abbreviations, it is important for the company developers to be able to correctly define them. A company that is new to the market should use the appropriate abbreviation, in order to effectively establish its business standards.

Confusion can sometimes be caused by these different abbreviations. For example, members of the general public may see a limited company as a corporation, however, a Corp has different regulations, and Inc and Corp should not be used interchangeably. A business organization needs to adopt a single entity, and work with the respected fundamentals. One appropriate designation should be chosen, whether it is Inc or Ltd, and this designation should be used for all the company’s letterheads, correspondence, domain names and business cards, along with the sales collateral.

Ltd means limited liability, and this designation is implemented when the company starts its processes. An Ltd format is commonly used for small companies that have a limited number of owners, and it can be similarly associated with a Limited Liability Company (LLC) or a corporation. This set-up allows for more flexibility for the owner(s), and the single owner can be treated as a disregarded entity. In this scenario, the single member is often singled out as the person responsible for performing the actions of the LLC. Companies with Ltd have limited liability, and therefore, the members of the company have restrictions for their shares. Some Ltd companies have been established on the basis of public funds that are in the form of equity and preference shares.

Inc refers to a company that is able to do business in a legal manner, and there are specific stipulations for this business model that protect the owners, CEO and board members. Companies that choose the Inc designation are assumed to be keen for limited liability processes. As far as the INC company is concerned, the stockholders, directors and officers, are not questionable for the debts, and other obligations, that the company holds. These companies are not separate legal entities.

Companies should be aware, that the regulations regarding an Inc or Ltd, will vary significantly between different countries, and within their jurisdictions. For example, some states in the US will only allow the formation of an Inc, and others will only allow a limited company. ‘Inc’ may be possible to use in any country, but the basic rules for that country, state or province, should be clearly understood. It is wise for a business owner to conduct thorough research on the rules and laws that apply to the country wherein he would like to begin his organization.

Summary:

1.Unlike Ltd companies, Inc refers to a company that has no restrictions for members as far as their shares are concerned.

2.The ‘Inc’ designation is best for large business organizations, whereas, the ‘Ltd’ is better for smaller businesses.

3.Inc may have more business owners than the Ltd companies, that have a limited number of business owners.

4.As far as the Inc company is concerned, the stockholders, directors and officers are not questionable for the debts and other obligations of the company. Ltd companies do not have these same rules.


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4 Comments

  1. I want to commend the author for the effort to write dow this article. I shared with my colegues, we all like it, look forward to your future articles.

  2. This looks a bit confusing to me when trying to underscore the differences between INC and LTD:

    “Inc refers to a company that is able to do business in a legal manner, and there are specific stipulations for this business model that protect the owners, CEO and board members. Companies that choose the Inc designation are assumed to be keen for limited liability processes. As far as the INC company is concerned, the stockholders, directors and officers, are not questionable for the debts, and other obligations, that the company holds.”

    As above is true, it does not help much to illustrate the difference.

    “Inc refers to a company that is able to do business in a legal manner…” – same for LTD, isn’t it?

    “Inc…there are specific stipulations for this business model that protect the owners, CEO and board members” – same for LTD, which also can have a CEO and the Board. Also members are protected by corporate veil exactly the same for INC and LTD. Am I missing something here?

    “Companies that choose the Inc designation are assumed to be keen for limited liability processes” – same for LTD. Its whole point is to establish corporate veil and operate under limited liability. What am I missing here?

    “As far as the INC company is concerned, the stockholders, directors and officers, are not questionable for the debts, and other obligations, that the company holds.” – same for LTD, with the exception of fraud, criminal activity and tax evasion, but these exceptions apply equally to INC and LTD.

    “Unlike Ltd companies, Inc refers to a company that has no restrictions for members as far as their shares are concerned.” – I thought that when I register an LTD, at least in British Columbia, Canada, i can set different classes of shares with any par value (or without) and with or without restrictions and/or exceptions. Am I missing something here too?

    Thanks for any comments.
    Vlad.

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