What Does "Ltd." Mean?

"Ltd." is a suffix that some businesses include in their name to indicate "limited liability." When a company has limited liability, the owners are usually not personally responsible for the debts and obligations of the business, and the company's creditors cannot go after the owners' personal assets like their cars or their homes.

The only businesses that can include "ltd." in their names are those that enjoy limited liability, such as corporations and limited liability companies (LLCs). Whether you can or must include "ltd" or another suffix in your company's name depends on the type of business entity you form and the laws of your state.

What Is Limited Liability?

When you form and properly maintain a business with limited liability, your financial responsibility will not exceed the amount of money you invested in the business. If someone successfully sues your company, they cannot collect more than what the business owns. If your business does not have enough money or assets to liquidate to pay the judgment, you are not responsible for paying the difference, and the remaining business debt will go unpaid.

If you did not file paperwork to form the business with the state, your business is a sole proprietorship or a partnership (depending on the number of owners). If the sole proprietorship or the partnership does not have enough money to pay damages from a lawsuit, the owner(s) are on the hook to pay the remaining debt.

Types of Companies With Limited Liability

When you start doing business by yourself or with a partner and do not file anything with the state (meaning you own a sole proprietorship or a partnership), you will not have liability protection. To protect your liability, you must form one of the following companies:

Corporation: A corporation is a business structure that is owned by shareholders and run by a board of directors. All of the shareholders and directors have liability protection.

Professional corporation (PC): In some states, if you are a licensed professional such as a doctor or an accountant, your only option for limited liability is a professional corporation ("PC"). A PC limits the owners' liability for business debts and the obligations of partners in the company. The owners remain liable for their own professional malpractice.

Nonprofit corporation: A nonprofit corporation is similar to a corporation in management structure, but different in how it handles profits. Instead of distributing profits to shareholders, nonprofits must use their revenue to further its charitable purpose. Nonprofit directors enjoy limited liability.

Limited liability company (LLC): An LLC is an entity that combines the flexibility and tax benefits of a partnership with the limited liability of a corporation. All LLC owners have liability protection.

Limited partnership (LP): An LP is a structure where one or more general partners operate the business and are personally liable for the debts of the business, and one or more limited partners are not involved in day-to-day affairs and have liability protection.

To learn more about the different types of businesses and how to select the best option for your enterprise, see our article Business Ownership Structures.

Options for Company Suffix

Every state has its own requirements for business names for the different business structures. Many states require or allow registered companies to include a suffix that indicates limited liability. You might choose "Ltd." as your suffix, or you could go with other options as allowed by your state's laws. When your state requires you to include a suffix in your name, you must include the suffix on everything with your company name that is visible to the public, such as your website and letterhead.

Some of the common suffixes to choose from include:

• Corporation: association, corporation, company, incorporated, limited, or an abbreviation (such as "co." or "inc.").
• Limited liability company: company, limited, limited company, limited liability company, or an abbreviation (such as "LLC" or "ltd.").
• Limited partnership: limited, limited partnership, or an abbreviation (such as "ltd." or "LP").
• Nonprofit corporation: association, church, college, company, corporation, club, foundation, fund, incorporate, institute, society, union, university, syndicate, limited, or an abbreviation (such as "corp." or "inst.").
• Professional corporation: chartered, corporation, incorporated, limited, professional association, professional service association, or an abbreviation (such as "PC" or "chtd.").