PVT. LTD. Company vs LTD. Company
We often come across the names of companies that are different with some being XYZ PVT LTD while others being XYZ LTD. The initials PVT and LTD stand for private and limited respectively, and though PVT LTD and LTD companies have many similarities, there are differences in nature and responsibilities along with differences in incorporation that will be talked about in this article.
The word Limited used in connection with companies applies to the liability of the shareholders or those who have put together capital to start the company. In case of the company failing, the liability of the subscribers or shareholders is restricted to the amount invested by shareholders. There can be companies Limited by Shares, but the word is also used for companies that are limited by guarantee. The companies limited by shares can be either PVT LTD or just plain LTD. The difference between LTD, or more commonly known as Public LTD, and PVT LTD pertains to restrictions by law on who can become shareholders of these companies. While there is no restriction on becoming a shareholder of a Public LTD company and anyone from the public can effectively become a shareholder by buying the shares of such a company from the stock market, company rules prohibit anyone other than permitted by the company, to become its shareholder in case of a PVT LTD Company.
In cases of insolvency or an internal crisis leading to bankruptcy, both PVT LTD Company and LTD Company face limited liability to its shareholders.
PVT LTD Company
In PVT LTD Company, there are very few shareholders and the company can start with as little as just two partners or shareholders. The maximum number of shareholders in a company can be around 50 with mostly subscribers drawn from family and friends. Shares of the company are not traded in a stock exchange and mostly borrowed or sold to other shareholders. Thus, shares remain within primary shareholders all the time. Despite private nature of share transfer, all such sales are kept a record of, and such record passed o to a government agency.
Referred to as Public LTD Company, the company is started with minimum seven shareholders and there is no upper limit on the number of shareholders as anyone from public and invest and become a shareholder of the company. The shares of the company are listed on the stock exchange, and thus anyone can freely sell or buy shares of such a company in the stock market. Though all shareholders technically are owners in the company, a board of directors is there to decide operations of the company on behalf of all shareholders.
What is the difference between PVT LTD. Company and LTD. Company?
• Both LTD and PVT LTD are companies with limited liability to shareholders.
• LTD Company is also called public LTD Company as its shares are freely traded on the stock exchange. On the other hand, there are fewer shareholders in a PVT LTD company and even these are friend or relatives.
• By definition, PVT LTD Company is smaller in nature and operations than a LTD Company.
• While the minimum number of shareholders in PVT LTD Company is two, in LTD Company, this number is seven.
• While the maximum number of shareholders in PVT LTD Company is around 50, there is no cap or ceiling as far as the maximum number of shareholders in a LTD Company is concerned.