{"id":1420,"date":"2020-12-16T04:43:12","date_gmt":"2020-12-16T04:43:12","guid":{"rendered":"http:\/\/nz.legalvision.com.au\/?p=1420"},"modified":"2023-03-17T16:30:27","modified_gmt":"2023-03-17T03:30:27","slug":"limited-vs-unlimited-company","status":"publish","type":"post","link":"https:\/\/legalvision.co.nz\/corporations\/limited-vs-unlimited-company\/","title":{"rendered":"Limited Company vs Unlimited Company in NZ"},"content":{"rendered":"

When <\/span>establishing the structure<\/span><\/a> of your New Zealand company, there are three different types of companies to note. Companies can either be limited or unlimited. Within limited companies, a company can be a limited liability company or a co-operative company. Both types of company are a separate legal entity in their own right, and owners can conduct business in similar ways. However, there are significant differences between a limited liability company and an unlimited company. These differences are especially significant from the perspective of company shareholders. This article explains the difference between a limited liability company and an unlimited company.<\/span><\/p>\n

Limited Liability Companies<\/span><\/h2>\n

These are the most common types of company in New Zealand. You can recognise them because they have Limited, Ltd or Tapui (Limited) at the end of their name.\u00a0<\/span><\/p>\n

A <\/span>limited liability company<\/span><\/a> is fully liable for all obligations it owes to third parties who contract with it. The directors are the ones who manage the company and enter into contracts on behalf of the company. The reference to limited liability is relevant to its shareholders only. The shareholders of the company are not liable for the debts and obligations owed by the company.<\/span><\/p>\n

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For example, suppose a person lends money to a limited liability company which then runs into financial difficulties. Shareholders do not have any personal liability to provide their own money if the company is unable to repay the loan in full.<\/span><\/p>\n<\/div>\n

Shareholders of a limited liability company are only liable for the amount they have agreed to pay for their shares. If a shareholder provides its full investment upfront when issued with shares, there are no additional amounts that the company can request from them. If a shareholder receives partly-paid shares, the company can demand any money owing for those shares, but no more than this amount.\u00a0<\/span><\/p>\n

Another payment that a shareholder of a limited liability company can be liable for is if the shareholder provides a personal guarantee in respect of a liability of the company. In this circumstance, the shareholder will also be liable under the terms of the guarantee where the company defaults.\u00a0<\/span><\/p>\n

Co-Operative Companies<\/span><\/h2>\n

A co-operative company is a limited liability company that has also been registered as a co-operative. You can register your company as a co-operative:<\/span><\/p>\n