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6 Types of Companies

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What's the difference of Co, Pty, Ltd, Inc, and so on? Best Answer: Ltd is a company limited by shares, but older companies used used this abbreviation for  all limited companies, such as Limited Liability Partnerships(LLP), Limited Liability Companies(LLC), Limited Partnerships (LP). Co. is simply a company which can be any business , in fact, all of the thins you are as!in about can be called companies. Corp. is a company owned by many people or roups. Pty. means indicates that a party, or proprietor, e"ercises private ownership, control or use over an item of property, usually to the e"clusion of other parties. #nc. is $uite comple" and can be $uite similar to a corporation or can be a non%profit &here are also 'L means not limited and some common forein abbreviations are A (A!tienesellschaft % erman: stoc! corporation), mb* (esellschaft mit beschr+n!ter *aftun % erman: Company with limited liability), .A. (ociedade An-nima, Portuuese: anonymous society  toc! Corporation), .r.l (societ/ a responsabilit/ limitata) % #talian: limited liability Company, .p. A. (ociet/ per A0ioni) % #talian: hares%based Company, and PLC after a 12 or #rish company name indicate that it is a public limited company, a type of limited company whose shares may be offered for sale to the public. (&he e$uivalent term in the 1nited tates is Public company)

Six different types of public and a nd proprietary companies James

Following on from my blog on company characteristics, I thought I would write a quick blog on the different types of companies that are common today.

Companies are classified accordin accor din to liability, si0e and where they are listed. 3e will discuss the first two and the resultin 4 common types of companies we arrive at. Classification according to member liability 1 – Companies limited by shares  (!nown as 5limited liability6 companies)

&ypically, members are usually shareholders and their liability is limited to the nominal (nominal &ypically, capital is defined as the capital with which the company was incorporated) value of their shares plus any unpaid amount on their shares.  As an e"ample, say you buy B*P shares at 789 for 899 s hares, then your liability is limited so that if B*P were to be sued, it is limited to the 789 paid. &his is sometimes conducted differently when you don6t fully pay for shares when the company floats. #f 7 was paid and 7 was then owed on the shares, then the remainin amount must be contributed should it be called upon.  As we probably !now by now, the sinificance is that shareholders are not liable for the full amount. &his is !nown as the share capital method of corporate finance. Another method is by debt ; oin to a ban! and as!in for money to be lent. &his is a different contractual areement.

2 – Companies limited by guarantee (small and charitable oranisations)

&he difference with these companies is that members can place a uarantee on the company which may only be enforced on the windin up of the company and is not an asset of the company which may be chared durin its life. &hese companies have no share capital unli!e companies limited by shares. <ften non%profit companies and charities use this method.  – !nlimited liability companies (partnerships)

&he unlimited liability company was the oriinal form of reistered company under the 8=>> 12  Act. #t is defined in Australia in the corporations act  as a company whose members have no limit placed on their individual liability to contribute to the debts of the company. &he ole advantae is that this company is e"empt from the prohibition on reduction of capital (s?=A) which means money can be more freely ta!en out of the company6s capital base. &he clear disadvantae is that members miht not be aware of their unlimited personal liability when  @oinin. &oday the unlimited liability company is used mainly by professional oranisations carried on in a partnership li!e many Leal and Accountin firms. " – #o liability companies ("clusively minin and resource companies)

#n Australia, companies may only be reistered as no liability where a) the company has share capital, b) the company6s constitution states that its sole [email protected] are minin purposes and, c) the company has no contractual riht under its constitution to recover calls made on its shares from a shareholder who fails to pay them s88?(?). s88?(?) of Corporations Act says constitution must state that the sole [email protected] is minin purposes. <riinally because minin is seen as particularly ris!y business and people were reluctant to invest. hares are part paid with the option of payin the remainder later. Classification according to si$e

&he other !ey way to classify companies is by their si0e and the corporations act in Australia and its e$uivalents abroad have provisions relatin to a company6s classification via its si0e. Corporations Law has been structured for lare companies with a division between ownership and control with sinificant capital from the investin public. 3hile this is the classic model of the corporation, most Australian companies are small, family companies. &his model is therefore appropriate for only a tiny proportion of the mar!et companies with the larer number of small private companies out there. mall companies are still covered under the corporations act but typically more reulatory burdens on are placed on larer companies.

Both proprietary and private companies e"ist: 1 – %roprietary Companies

 A proprietary company must: a) be limited by shares (8 above) or be an unlimited company ( above) with a share capital b) have no more than 9 non%employee members c) not do anythin that would re$uire the issue of a prospectus (prohibition on see!in investment from the public). #f a company doesn6t $ualify as a proprietary company, then it6s a public company and must comply with all the reulatory re$uirements associated with that. &he minimum number of persons is one (shareholder and director). 2 – %ublic Companies

 As above, if a company doesn6t $ualify as a proprietar y company, then it6s a public company. A public company must have a minimum of  directors, ? of whom must ordinarily reside in  Australia. *owever, many enterprises structured themselves so that they @ust met the definition of a proprietary company to avoid reulatory provisions. &he overnment then redefined the proprietary company definition in s>A(?) of Corporations Act . &he act now identifies smaller companies on the basis of value and si0e of the business.  A proprietary company is small if it satisfies ? of the followin criteria: a) the consolidated ross operatin revenue of the financial year of the company and any entities it controls is less than 789m b) the value of the consolidated ross assets at the end of the financial year of the company and the entities it controls (if any) is less than 7m c) the company and any entities it controls have fewer than 9 employees. & classifications of companies

 After all this, we arrive at the followin possible combinations of different com panies with the proprietary limited (5pty ltd6) company bein the most prevalent.

Proprietary companies

1 – Limited by shares 98.2%

(no more than 50 non-employee  shareholders)

3 – Unlimited with share capital

Public companies

1 – Limited by shares 0.7%

(all non-proprietary companies: s9 definition of public company) 2 – Limited by garantee

3 – Unlimited with share capital

! – "# liability c#mpany (mining only) 0.09%

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