Definition:

A company limited by shares is a company in which the shareholders own shares, which represent a portion of the company’s ownership. The shareholders are responsible for limiting the company’s liability to their investment in the company.

Key Features:

1. Shareholder Liability:– Shareholders are not personally liable for the company’s debts beyond their investment.- Their liability is limited to the amount of their shareholding.

2. Shares:– Shares represent ownership in the company and are traded on the stock exchange.- The number of shares a person owns determines their ownership percentage.

3. Share Capital:– The company raises capital by issuing shares to investors.- The share capital is the total value of the company’s shares.

4. Dividends:– Companies may pay dividends to shareholders as a return on investment.- Dividends are paid out of the company’s retained earnings.

5. Limited Liability:– The company has a limited liability, meaning that its shareholders are not personally liable for its debts beyond their investment.

6. Corporate Governance:– Companies limited by shares are governed by a board of directors and shareholders.- They are required to follow certain legal and regulatory procedures.

7. Dividends and Capital Returns:– Companies may distribute dividends to shareholders or use retained earnings for growth or expansion.

8. Transferability of Shares:– Shares can be freely transferable on the stock exchange.

9. Publicly Traded:– Many limited companies are publicly traded on stock exchanges, allowing investors to buy and sell shares.

Examples:

• Apple Inc.
• Microsoft Corporation
• Toyota Motor Corporation

Advantages:

• Limited liability for shareholders
• Access to company’s assets and dividends
• Ability to raise large amounts of capital
• Publicly traded companies provide greater liquidity and transparency

Disadvantages:

• Greater regulation and compliance costs
• Potential for shareholder disputes
• Possibility of insolvency if the company fails