During the institution of a business group, the first decision is to choose between the different kinds of business models. The two most common models are Ltd and Inc. Ltd is abbreviated for Limited while Inc is for Incorporated.
Inc vs Ltd
The main difference between Inc and Ltd is that an Incorporation is the formation of a new business entity in which the legal department is separated from its owners and the profit and loss of the company is not passed to the members while a Limited company is that in which the ownership is limited to a few individuals or a group of individuals who have invested in the company.
In a limited company, powers lie in the hands of the owners who are either the investor of the company or the guarantor of the company. On the other hand, Inc is a company that is kept apart from its owners.
Comparison Table Between Inc and Ltd
| Parameter of Comparison | Inc | Ltd |
|---|---|---|
| Basic definition | Inc is an entity that is kept separate from its owners. | Ltd is a company in which the powers or the liability of the company are vested with the people investing in it or with the people who have taken a guarantee of it. |
| Management | Inc company is regulated or run by the board of directors and the companies are required to appoint officers as per the laws established by the government. | Ltd company has to appoint officers at various levels and is run by at least one director. |
| Taxation system | The company pays the corporation tax while its profit and loss are transferred to the company and does not reach its members. | The Ltd company has a single taxation system, therefore, the profit and loss are passed to its members. |
| Ownership of the company | An Inc company is held by the stockholders. | Members of the company can either be public or from a defined group. |
| Suitable for | Inc designation is more suited to large businesses. | Ltd designation is more suited for small business organizations. |
What is Inc
Inc is an abbreviation for Incorporated. Inc is a company in which the entity is separated from the owners, it is an entity that does its business on the legal guidelines. It has laws relating to the formation of a board of directors and other company officers and has a separate legal body. It has some specific laws that tend to protect owners whenever required. An Inc can be a business group, a sports club, a nonprofit organization, etc.
The company pays the corporation tax. All of its profits and losses remain within the company and as not transferred to its members. An Inc company mostly is in the hands of the shareholders and therefore it has more owners than a Ltd company.
In its shares, an Inc company does not pose any restrictions on its members, however, in an Inc company there are some limits on the liabilities of an individual. If there are any debts, the directors, officers and shareholders are not answerable to anyone. An Inc designation is more suitable for large business groups.
What is Ltd?
Ltd is the abbreviation used for limited. A company in which the power lies within the hands of a few individuals or a group of individuals is known as a limited company, that is, the power of the company is either in the hands of investors or guarantors. It is referred to as limited since its share and guarantors are limited in number. It has at least one director and has the company officers at various levels. A ltd company has limited liabilities.
A limited company has a single taxation system. The profits and losses of the company are directly transferred to its members. The members of a limited company are either public or a group of some individuals.
When it comes to shares, a limited company poses some restrictions on its shareholders. It has a separate legal body for its shareholders. Officers and directors are answerable in case of debts. The designation Ltd is suitable for small business groups.
A Ltd company can either be a public limited company or a private limited company depending on the type of its members. If the shares are with the public then it is a public limited company and if the shares are with a group of individuals then it is a private limited company.
Main Differences Between Inc and Ltd
- Incorporated is a company that is kept aside from the owners while Limited is a company in which the power lies with the owners of the company.
- An Inc company has more owners as compared to the Ltd company since Ltd company has a restricted number of owners.
- Inc company is regulated by the board of directors and the company officers, on the other hand, Ltd company is required to appoint officers at various levels and has at least one director in it.
- In an Inc company, the profit and loss are not transferred to the members of the company while in a Ltd company the profit and loss are transferred directly to its members.
- An Inc company is in the hands of the stakeholders while a Ltd company is either held by the public or by a group of individuals.
- When it comes to shares, Inc company does not pose any restriction on the members while it is not the case with a Ltd organization.
- In the case of debts, directors, officers and stakeholders are not questionable while in a Ltd company they have other rules regarding this.
- The incorporated designation is better for large businesses while the limited designation is more suited to the small business groups.
- The legal entity is separated from shareholders in both the Inc and Ltd company.
Conclusion
The two business models have some differences in the way they are formed and how they are regulated. For any business to be successful the domain adopted should always be appropriate, therefore, it becomes necessary to use the correct model.