What distinguishes a private limited company from other business structures?

What distinguishes a private limited company from other business structures?

• A. It can issue public stock
• B. It has unlimited liability
• C. Profits are shared among shareholders
• D. It can have up to 20 partners

Answer: (C)

A private limited company is characterized primarily by the fact that it has shareholders whose profits are distributed among them. This means that the company is owned by a small group of individuals or entities who share in the profits on a pro-rata basis, based on their shareholdings. Unlike public limited companies, which can offer shares to the general public and have a potentially unlimited number of shareholders, private limited companies restrict ownership to a defined number of shareholders, and their shares cannot be traded publicly. The structure of a private limited company thus allows for a clear delineation of ownership and profit-sharing among its members, making it an attractive option for smaller businesses or family-owned enterprises that wish to retain control while still benefiting from limited liability. This characteristic promotes an environment where shareholders' commitments are limited to their investment in the company, insulating personal assets from business liabilities.

A private limited company is characterized primarily by the fact that it has shareholders whose profits are distributed among them. This means that the company is owned by a small group of individuals or entities who share in the profits on a pro-rata basis, based on their shareholdings. Unlike public limited companies, which can offer shares to the general public and have a potentially unlimited number of shareholders, private limited companies restrict ownership to a defined number of shareholders, and their shares cannot be traded publicly.

The structure of a private limited company thus allows for a clear delineation of ownership and profit-sharing among its members, making it an attractive option for smaller businesses or family-owned enterprises that wish to retain control while still benefiting from limited liability. This characteristic promotes an environment where shareholders' commitments are limited to their investment in the company, insulating personal assets from business liabilities.