Company names usually end with the suffix ‘Pty Ltd’, ‘Ltd’, and ‘NL’. Although they may just look like letters, these letters determine what liability your company has.
When you register a company, you must include either Proprietary Limited, Limited or No Liability in the name. The suffix your company has will depend on what type of company it is. To misuse these titles is a very serious matter and would constitute a breach of the Corporations Act 2001 (Cth). If you breach this Act, you will face penalties from ASIC.
Only registered companies can use Pty Ltd, Ltd, and NL. This is because registered companies are considered to be a distinct legal entity, separate from their directors. This means that you will not be personally liable for any company losses or debts.
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Conversely, you will be liable for any losses if your business is not incorporated. For example, if you run a business as a sole trader, you are the legal entity responsible for the business.
Learn about the differences in liabilities for companies below.
Pty Ltd
Pty Ltd is a term which you will often see at the end of company names. It is an abbreviation for ‘proprietary limited’. Proprietary companies are the most common form of company. This type of company may only have up to 50 shareholders, and they are private. Private companies are only required to have 1 director. They are regulated by ASIC. The transfer of shares has to be done via the consent of the shareholders, and shares cannot be offered to the public or fundraised (subject to certain specifications).
Small and large companies
The Corporations Act differentiates between small and large proprietary companies. A proprietary company is small if its yearly revenue is below $25 million, if the value of the company’s gross assets is less than $12.5 million, and if it has less than 50 employees. A proprietary company is large if its annual revenue is $25 million or more, if the value of the gross assets is more than $12.5 million, and if it has more than 50 employees. There is also a difference between Pty Ltd and Pty. Proprietary limited companies (Pty Ltd) are limited by shares. On the other hand, unlimited proprietary companies (Pty) have share capital and shareholder liability is not limited.
Ltd
Ltd simply means ‘limited’ and refers to limited liability. Limited liability companies are public companies, which means the public has a certain amount of ownership. Public companies may generate revenue in this way, whereas private companies cannot. ASIC requires limited companies to lodge their annual accounts with them. Public companies must have at least 3 directors. Unlike proprietary companies, public companies may have as many shareholders as they like. Proprietary companies tend only to provide shares to a select number of people. ASIC and APRA regulate these companies. Finally, public companies may list their shares on the Australian Stock Exchange (ASX).
NL
Although this type of company is very specific, it is still worth noting. NL means Alternate Director liability, and it refers to a public company in the Australian Mining Industry. Due to the financial risk that mining involves, it is necessary for shareholders not to be liable to pay calls on unpaid shares.
Conclusion
Differences in legal jargon can be confusing. This is especially the case when the differences are so important and will determine how you run your business. Hopefully this guide has given you a greater understanding of the types of companies and their requirements. If you are still unsure, contact a business lawyer or a commercial lawyer.
