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What Is an LTD Business?
An LTD business is a company that has been incorporated by Companies House for operation within the United Kingdom. An LTD company is a privately held commercial enterprise that has one or more registered employees. LTD companies are traditional companies and are their own legal entity. This status sets them apart from sole trader businesses, which are not separate from the business owner.
Is LTD the Same as Limited?
Yes. You may see company names that finish with LTD or Limited. These are the same types of businesses. LTD is not actually an acronym; it is a shortened term for the word “limited”. LTDs, Limited Liability Companies, and Limited Companies are all exactly the same.
What Is the Difference between a (PLC) Public Limited Company and an (LTD) Private Limited Company?
LTD is not the only type of incorporated business. You can also have PLCs — Public Limited Companies. A PLC acts very much in the same way as an LTD with one major difference. LTD companies are privately owned, which means for anyone to purchase or own shares, and therefore be part of the business; they must have approval from company directors and other shareholders. PLCs do not have such limitations. Any member of the public is free to buy and sell shares that belong to a PLC.
PLCs relinquish a certain amount of control, as you cannot decide who invests in your business. However, PLCs do open up new avenues of capital gain, as they allow you to trade shares on the stock market. This is not something you can do as an LTD business.
How Do LTDs Work?
LTD companies work by separating the owner from business. As a self-employed sole trader, you are the business, which means you are liable for all responsibilities of that business. Essentially, this means that if the business incurs debt or legal problems, you are personally responsible for those liabilities.
The “limited” part of LTD represents limited liability. When you establish an LTD company, you create a new business entity. Your company becomes its own legal property. This means if the business owes money, you are separated from the company and do not pay that money out of your own pocket.
What Are the Other Benefits of LTDs?
Besides protecting liability, there are some other key benefits to LTD companies.
Because an LTD business is a separate entity, it can be bought and sold like any other commercial asset. How does this work? Owners of an LTD are appointed, which means the current owner can change them. When transferred, the new acting director takes over ownership of the LTD and has the rights to access its assets and resources. Even if the founder were to try and reclaim the business, it would only be possible if the current owner agreed. Only those registered to an LTD company have rights to govern and manage it — nobody else. This affords certain commercial protections, particularly if the business owns trademarks, patents, a reputation or recognisable branding.
In a similar vein to branding, LTDs also protect the company name. Only one business name can be registered to one active business in the UK. If your business is incorporated by Companies House and registered as an LTD, no other organisation can take that name and use it for trading in Great Britain.
There are also certain tax benefits to an LTD business as compared to self-employed sole trader enterprises. LTDs allow business owners to take out dividends from the company, which if managed effectively, can result in major savings. We suggest you discuss ways to optimise your business for tax savings with a qualified accountant or financial advisor.
