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What is a Pty Ltd company?
If you’ve ever seen a company with “Pty Ltd” after the company name, you may have wondered — what does Pty Ltd mean? There are various reasons why a business would want to operate as a proprietary limited company. In this article, we’ll take a look at these companies, how they work, and the advantages they offer.
Pty Ltd Definition
When setting up a company, the Pty Ltd is short for “Proprietary Limited”. This is a company that operates privately, and has not offered shares to the general public. The owners of such a company limit ownership to no more than 50 non-employee shareholders.
Proprietary limited companies are defined in Section 45A of the Corporations Act 2001 (Cth), and can be somewhat complex regarding investor disclosure. These companies must refrain from any action that would require disclosure under Chapter 6D, with the exception of extremely limited circumstances. This clause is primarily concerned with limiting engagement with investors over the 50 non-employee shareholder limit.
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Why Establish a Proprietary Limited Company?
There are several reasons why businesses choose to establish a proprietary limited company. Proprietary limited companies typically operate with no investors or backing, or are backed by a small pool of investors. For this reason, most proprietary limited companies are small to medium enterprises and startups.
When a company restructures and becomes a publicly listed company, it loses proprietary limited status. Proprietary limited companies typically shift into publicly listed companies in order to raise capital during critical growth stages. Large-scale capital generation often requires more than 50 non-employee shareholders.
What are the Advantages of a Proprietary Limited Company?
The definition of a proprietary limited company does not limit the size of a company. Proprietary limited companies can operate with any level of assets or turnover. Many large-scale businesses choose to operate as proprietary limited companies due to the privacy benefits a small pool of shareholders provides.
Proprietary limited companies also benefit from a reduced regulatory burden. Publicly listed companies must provide regulators and shareholders with a wide range of reports on an annual basis. Proprietary limited companies benefit from limited disclosure obligations in contrast to publicly listed companies.
How to Use “Pty Ltd”
There are a number of rules that must be followed when operating a proprietary limited company. The full company name of a company must be listed on legal documents, including the Pty Ltd suffix.
Section 144 of the Corporations Act dictates that companies must display their name prominently wherever they do business in a manner that is open to the public. For these companies, this means including the Pty Ltd suffix in the company name.
It’s not necessary, however, to use the Pty Ltd suffix in everyday trading. To operate without the need to list the Pty Ltd in day to day trading, it’s necessary to register a company name without the Pty Ltd suffix as a business name against the ABN linked to the company.
Section 165 of the Corporations Act provides companies with the option to use either abbreviations (Pty Ltd) or “proprietary limited” in full. “Proprietary Limited” and “Pty Ltd” can be used interchangeably — it’s possible to present your company name as “Proprietary Ltd” or “Pty Limited”
It’s important to note that if you want to operate as a proprietary limited company without the Pty Ltd suffix you must register a business name.
