The difference between incorporated and limited is very subtle as these two are very similar to one another. Incorporated and Limited are among a number of different types of business structures including sole traders, partnerships, limited liability companies, limited companies, incorporations, private limited companies, etc. Before a firm can commence operations they must decide upon the business structure that is most suited to them, and that can drive growth and profitability for the firm. In this article, we examine two types of business structures: incorporated firms and limited companies. Despite their subtle differences it is important to clearly understand their differences, especially when making decisions regarding the business structure that the company is to be registered as at startup.
What is Incorporated?
The term Incorporated refers to a firm that acts as a separate legal entity from its directors and owners. This means that in the case of a lawsuit of bankruptcy, the owner’s liabilities are limited. As a separate legal entity an incorporated firm is liable to make tax payments, debt payments, etc. It can also sell shares on a stock exchange in order to raise capital. As it is a separate legal entity, an incorporated can continue operations as a business entity even after the death of the owner, director or sale of the company. A company that is incorporated usually has the term Inc. at the end of their company name.
What is a Limited Company?
Limited company is a firm whose liability of the investors or owners is limited to the amount of money that they have contributed/invested in the business. A limited company carries the term Ltd at the end of its company name. The owners of a company that is registered as a limited company is safer in the event that the firm faces bankruptcy. This is because owners’ losses are limited to their specific share of contributions and cannot be held responsible for losses beyond their share of contribution. A limited company is also referred to as a firm that has a limited number of shareholders. Limited companies can be further divided into private limited companies and public limited companies.
What is the difference between Limited and Incorporated?
There are number of different business structures that a company can choose from when deciding to register and startup business operations. The article discusses two such business structures: incorporated and limited. These types of corporations are very similar to one another with a very few subtle differences between them. An incorporated firm is a separate legal entity and is responsible for making tax payments, debt payments, etc. A limited company is a firm that has limited liability for its investors and shareholders. In an incorporated firm profits and losses are not passed onto the owners, and therefore only pays corporate tax. In a limited company, profits and losses are shared among owners and owners can be taxed for their dividend income. Companies that are incorporated are usually larger firms, whereas companies that are registered as limited companies are smaller firms and may have a limited number of shareholders.
Summary:
Incorporated vs Limited
• There are number of different business structures that a company can choose from when deciding to register and startup business operations. Before a firm can commence operations they must decide upon the business structure that is most suitable to them, and that can derive growth and profitability for the firm.
• The term Incorporated refers to a firm that acts as a separate legal entity from its directors and owners. As a separate legal entity an incorporated firm is liable to make tax payments, debt payments, etc. It can also sell shares on a stock exchange in order to raise capital.
• Limited company is a firm whose liability of the investors or owners is limited to the amount of money that they have contributed/invested in the business. A limited company is also referred to as a firm that has a limited number of shareholders.
• In an incorporated firm profits and losses are not passed onto the owners, and therefore, only pays corporate tax. In a limited company, profits and losses are shared among owners and owners can be taxed for their dividend income.
• Companies that are incorporated are usually larger firms, whereas companies that are registered as limited companies are smaller firms and may have a limited number of shareholders.
Photo By: Akshat1234 (CC BY-SA 3.0)
Further Reading:
- Difference Between Limited Company and Private Limited Company
- Difference Between Limited and Ltd
- Difference Between Sole Trader and Limited Company