What is a company owned by shareholders, where shares are sold privately and owners have limited liability called?

• A. Public limited company
• B. Private limited company (Ltd)
• C. Partnership
• D. Sole proprietorship

Answer: (B)

A company owned by shareholders and characterized by shares being sold privately is known as a private limited company (Ltd). This type of company has a distinct advantage in that it limits the liability of its owners, meaning the shareholders are only financially responsible for the company’s debts up to the amount they invested in shares. This protection encourages investment, as personal assets of the shareholders are typically safe from business liabilities.

In a private limited company, shares cannot be traded publicly on the stock exchange, which is a key feature that differentiates it from public limited companies. The private nature of share sales means that ownership is typically held by a small number of shareholders, often among family or close associates, contributing to a more controlled business environment.

This structure is particularly appealing to small to medium enterprises looking to maintain a level of privacy and control while also benefiting from the limited liability aspect that attracts potential investors. Understanding this framework can be crucial for students studying enterprise and business management principles, as it emphasizes the differences in company structures and their implications for ownership and liability.