DIFFERENCE BETWEEN A LIMITED COMPANY AND A BUSINESS NAME.

For purposes of this explanation a Business Name refers to both a Sole proprietorship &
Partnership

Business Name Registration:
1. The Proprietor(s) are personally
responsible for all the affairs pertaining to the business.

2.The law does not make any distinction between the owner and his business. In the eyes of the law, both the owner and his business are the same.

Since the law does not distinguish between the owner and his business, his liability is unlimited.

For e.g If the business goes bankrupt, the owner will have to cough money from his own assets and financial reserves to pay to the creditors and lenders

3. The sole trader is also liable to pay for any legal compensation that might arise in the course of running the business.

4. He will not be able to defend himself by saying that the act was committed by his business and not by him.

5. The sole trader has the final say as far as decision-making is concerned.

6. He is not legally bound to listen to anyone.

7. He may do whatever he deems to be fit.

8. He keeps the entire profit earned by him. Similarly he also has to shoulder the entire burden of loss.

9. A sole entity might come to an end if the owner becomes bankrupt or has an untimely demise, with no one to look after the business.

Limited Liability Company:

1. A limited company is a separate entity and is a separate person in the eyes of the law. Since a limited company is a separate person, it can hire ‘employees’. These employees are responsible for running of the company.

2.These employees can be the directors of the company, the secretary as well as the staff including the receptionist!

3. A limited company can be set up with a minimum of two shares holders and the limit of their liability is as per the value of shares they own,

The laws of almost all the countries specifies the use of the word ‘limited ‘ or ‘Ltd’ after the name of the company.