Which of the following is a feature of limited companies?

• A. Limited liability
• B. Unlimited liability
• C. No taxation
• D. No share issuance

Answer: (A)

Limited liability is what defines a limited company: the owners’ or shareholders’ risk is limited to the amount they have invested in shares, not their personal wealth. The company is a separate legal entity, so debts belong to the business, not to individuals personally guaranteeing them. That’s why shareholders won’t be pursued for the company’s debts beyond their shareholdings.

Why the other statements aren’t features: unlimited liability would mean personal assets could be used to pay company debts, which is not how limited companies work. No taxation isn’t true because companies pay corporation tax on profits. No share issuance is also incorrect because limited companies raise capital by issuing shares.