Are you exploring the Australian business landscape? Or maybe, you are considering starting an enterprise? If you’re planning to establish a business in Australia, during your research phase, you might have come across terms such as “Pty”, Pty Limited”,”Pty Ltd”, “Limited”, or “NL” or No Liability.”
Some companies (mainly charities and other not for profit companies) dispense with any of these words and these are usually companies limited by guarantee rather than shares.
Wondering what these terms mean? You have just landed at the correct destination – read on to learn more or reach out.
Companies having legally valid establishments in Australia names typically end with the suffix ‘Pty Ltd’, ‘Ltd’, and ‘NL’ or longer form version of these terms. These suffixes determine the legal liability of the company.
Therefore, when registering a company, it is generally necessary to include the terms Proprietary Limited, Limited, or No Liability in the name. In addition, the suffix your company or business receives will depend on the type of establishment. Consulting a business lawyer can help you understand which establishment works best for your business and how you should register it.
Misusing these titles is a punishable offence and would lead to a breach of the Corporations Act 2001 (Cth), which can result in incurring penalties from ASIC.
Importantly, only registered businesses can use the terms Pty Ltd and Ltd. NL companies operate in the mining and exploration areas.
Let’s take a look at each of these terms in detail. Regardless of the type of company, it is best to hire a corporate lawyer in Australia for seamless documentation and establishment of your business.
Proprietary
The term Proprietary Limited is reserved for completely private companies. This means that the number of shareholders in such companies is limited to 50.
Also, it is not permitted to enlist a private company on the Australian Stock Exchange to raise money from the general public by offering shares. Therefore, raising capital can be tricky for companies with a private status. In case of legal disputes, hiring corporations lawyer in Sydney is always advisable.
Limited
The term “Limited” in “Proprietary Limited” is used to describe the company’s limited liability. This means that the shareholder’s legal responsibility for the company’s debt will be limited to the number of shares personally owned by that particular person.
In simple words, if the establishment becomes insolvent, the shareholders will only lose the financial amount they had invested in purchasing their shares.
In order to ensure that your company complies with all legal requirements, it is best to collaborate with the best law firms in Australia.
Apart from Company Limited by shares, there is also an alternative known as Company Limited by guarantee.
Under such an agreement, the shareholders guarantee a particular amount of financial responsibility. Therefore, if the company goes into insolvency, the members will have the liability to pay that guaranteed amount.
Proprietary Limited Companies
A Proprietary Limited (Pty Ltd) company is comparatively simple to establish. A Pty Ltd company does not have the legal rights to raise capital by offering shares to the general public. Additionally, their director(s) or shareholders are commonly safeguarded from any liability to the company’s debts.
These factors make Pty Ltd companies one of the most popular establishments in Australia. In addition, this company type is ideal for small to medium-sized businesses.
Advantages of being a Pty Ltd company
Operating your business under a Pty Ltd establishment offers the following advantages:
● Added privacy when compared to being a Ltd company
● Fewer disclosure obligations and mandatory information disclosure are only visible to a limited and closely-knit group of shareholders.
● Pty Ltd companies encounter fewer regulatory burdens unless they are large proprietary companies
For example, as an Ltd establishment, the company will need to submit several reports including audited reports to both regulators and shareholders. In contrast, there is no need to submit such reports for Pty Ltd companies.
What are the requirements of Pty Ltd Company?
A Proprietary Limited company needs to follow certain regulations.
Under Australian law, Proprietary Limited businesses also need to have a registered office and the principal place of conducting business. All the formal documents will be sent by ASIC to your company’s registered office address or to the company’s registered agent.
Limited Companies
Unlike Pty Ltd, Ltd establishments are public companies. Essentially, this means they can offer shares to the general public to raise business capital. Furthermore, Ltd companies can also be listed on the Australian Stock Exchange or other stock exchanges.
There’s no restriction on the maximum number of shareholders a Ltd company.
Public companies must comply with far stricter regulations, including considerable accounting and reporting obligations designed to protect the public. Therefore, hiring a qualified commercial lawyer Australia is essential.
Similarly to their Pty Ltd counterparts, Ltd company directors are also protected by limited liability.
Benefits of being an Ltd company
● Increased scope and frequency of business capital raising and access
● Limited liability; and
● Increased public profile.
Small and Large Proprietary Companies
Legally, there are certain distinctions between small and large proprietary companies. In fact, large and small companies have different sets of regulations. A proprietary company is considered large if it fulfils at least two of the following qualifying criteria:
● Its annual revenue is equal to $50 million or more.
● It owns assets worth $25 million
● It has a minimum of 50 employees
Wrapping Up
When establishing a business, most companies start their journey as private entities before they convert or transfer into public companies. Additionally, you can only use the suffixes Pty or Pty Ltd in your company name if you have legally incorporated your business.
For further legal advice, it is best to hire a business lawyer in Australia to get a better idea about company liability, establishments, as well as relevant existing regulations, terms, and conditions.
