If you see ltd in a company's name, it means that company is a private limited company. What does this mean?

Private limited companies sell shares, but only to selected family and friends. Shares in these companies are not available for purchase on the stock exchange, as they are for a plc (public limited company).

Private limited companies have limited liability, meaning that people who buy shares in the business are only liable for the capital they invested, and nothing else. (These shares are known as equity).

Becoming an ltd is commonly seen as the next step up for a sole trader. The benefits he will receieve are unlimited liability and easier access to capital. It is common for simply him and his wife (for instance) to buy the minimum amount of shares needed for the company (in the UK, it's 2 shares at 50p each).

Although a company may wish to stay as an ltd on a permanent basis, larger companies that are going places will usually want to float themselves on the Stock Exchange for a lot easier access to capital, and "better" status in general. For instance, when a bank is considering a loan, it looks more favourably upon an ltd than a sole trader, and more favourably on a plc than an ltd.

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