What Does Pty Ltd Mean

What Does Pty Ltd Mean?

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You may have noticed that most of the company names end with the abbreviation Pty Ltd, which is short for ‘proprietary limited.’ This word relates to the business form of a firm as it means that shareholders are responsible for debts of a firm only up to their defined limit. Owning and running private companies with the ‘proprietary limited’ label is a fairly simple procedure. Furthermore, these companies are the most common type in Australia. The purpose of this article is to shed further light on the commonly used term ‘Pty Ltd’ and describe how proprietary limited companies are required to be set up.

Proprietary

The ‘Pty’ or ‘proprietary’ in the term ‘proprietary limited’ denotes that as a business formation, a limited amount of shareholders own the shares in the company. Furthermore, the company cannot issue shares to the general public. This is different from public companies that have the abbreviation ‘Ltd’ at the end. The number of shareholders in a public company is not limited and the company’s shares can be offered to anyone. If it is a company listed on the Australian Stock Exchange (ASX), you can purchase and trade in its shares. 

Private companies have limited ability to raise capital since they cannot sell an infinite number of shares to make money. In contrast, public companies have higher regulatory requirements with major accounting and reporting requirements in place to protect the masses.

Limited

The word ‘Ltd’ or the term limited imply that a shareholder is only legally bound to each and every debt or liability of a company up to the value of his shares in it. That is, if a company goes bankrupt its shareholders lose the money they invested into purchasing their shares. If a shareholder has been issued shares at less than the full price, they will need to pay for them.

An alternative to a company limited by shares is a company limited by guarantee. At these firms, members are made to accept a specific degree of legal responsibility the moment they become members. In other words, they agree to indemnify the company up to a certain liability amount.

Small and Large Proprietary Companies

The law distinguishes between small and large proprietary companies and regulates them differently. As of 1 July 2019, a proprietary company is large if it meets at least two of the following criteria:

  • More than $ 50 million annual revenue or above;
  • $25 million worth of assets and above;
  • Employs 100 employees or above.

What Are the Requirements for Pty Ltd Companies?

As a proprietary limited company, you are bound by certain legal responsibilities. To incorporate a Pty Ltd company, as of July 1, 2019, you are required to pay an upfront incorporation fee in the amount of $495 to ASIC. Apart from that, there is an annual review fee of $267 due on the anniversary date of incorporation.

Proprietary limited companies in Australia must have registered office and principal place of business. ASIC sends documents to the registered office of the company.

A principal place of business is the main place where you operate your business and its activities.

A proprietary limited company is also required to have one director who does not live in Australia as his residence. The director’s duties should also be observed by directors.

Big proprietary companies are required to file and submit financial reports and directors’ reports every year. ASIC must also audit their accounts. These reports also do not need to be filled by small proprietary companies unless ASIC wants. However, they should keep proper financial records and file Business Activity Statements to the Australian Taxation Office (ATO).

Use of ‘Pty Ltd’ With a Company’s Name

A company may have both a business name and a company name.

As a rule, a company may operate under a business name without appending the Pty Ltd abbreviation after it. The business name does not have to be identical with the company name. In the case of a business name, you must register a business name with ASIC.

For instance, an accounting business owner named John might be operating under the name ‘John Fashion’. He may desire to operate his business as a company if it grows. To do this, he must register his accounting business with ASIC. He will also have to incorporate his business as John Fashion Pty Ltd. This will apply even if the name of John’s business is ‘John Fashion with the Austrian Tax Office.

Key Takeaways

Pty Ltd stands for ‘proprietary limited’ and refers to a specific form of private companies structure widely used in Australia. These private companies are privately held with restricted amount of shareholders. They do not sell their shares to the public. Shareholders of Pty Ltd company are limited in their legal responsibility for the debts owed by the company. For more information about company incorporation and company secretary, contact FastLane Group for free consultation.