Comparison of LTD to LLC

By Tom Streissguth

LLC and Ltd are two common abbreviations used with business names. The abbreviation means that the company is licensed and registered to do business in the state -- or country, in the case of Ltd. -- where it operates.

LLC and Ltd are two common abbreviations used with business names. The abbreviation means that the company is licensed and registered to do business in the state -- or country, in the case of Ltd. -- where it operates.

LLC

A limited liability company is organized according to the state laws where it is formed and operated. The owners of the company are known as members. The net income of the company is passed through as personal, not business, income, and is declared to the Internal Revenue Service on personal income tax forms. There is no business or corporate income tax at the federal level, although some states tax LLCs as corporations or partnerships, and not as individual income.

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LLC Member Protection

LLC members are protected from personal responsibility for the debts of the company, and their risk in the business is limited to the amount of money they originally invested. Although the LLC can be sued for damages or debt, the members are protected from personal liability for any judgment entered by a court against the LLC. This affords a business more legal protection than is possible with a sole proprietorship.

Ltd.

The abbreviation "Ltd." stands for "limited," and a company carrying this abbreviation has the same limited liability feature as an LLC. Partners and owners in the company are protected from personal responsibility for debts and lawsuits. Ltd. is a descriptor, not a specific business entity, in the United States. A "C" or "S" corporation, for example, may carry "Ltd." at the end of its name. The Ltd. abbreviation as a legal business entity is common in the European Union, where laws governing business formation are more specific with regard to the number of shareholders, how dividends are paid and taxed, and other matters.

Taxes and Shareholding

Unlike LLCs, Ltd. companies, when operating as "C" corporations, are taxed as separate entities on their net income at the prevailing business tax rate. The laws governing such companies in Europe restrict who may be a shareholder, and shares are traded privately, rather than through a public stock exchange. LLCs do not issue shares per se, either publicly or privately, although they can use operating agreements that spell out how the income from the business will be divided among members.

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What Are the Tax Advantages of LLCs?

References

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What Does LLC Mean on the End of a Company Name?

LLC is the abbreviation for limited liability company. LLCs are relatively new business structures that combine the features of a corporation and a partnership, specifically the tax benefits of partnerships and the liability protections of a corporation. State governments regulate LLCs, and restrictions on LLC names and abbreviations vary from state to state.

Can I Have a Partner With an LLC?

A Limited Liability Company is a common business entity that may be owned and managed by one or more individuals. LLCs, formed and managed under state law, are relatively simple to set up, and allow for a flexible management structure. Unlike a partnership, LLC owners, known as members, are not personally liable for the debts and obligations of the company.

LLC Vs. Company

By definition, every limited liability company, or LLC, is a company. The reverse is not necessarily true. A limited liability company is one of several possible legal structures for a business, with specific rules that apply to its formation and its day-to-day operations. The word “company,” on the other hand, is much more general.

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