Which statement is true about a private limited company?

Which statement is true about a private limited company?

• A. It can sell shares to the general public
• B. It has unlimited liability
• C. It must be listed on a stock exchange
• D. Its shares cannot be bought by the general public

Answer: (D)

Private limited companies raise capital from a relatively small group of private investors, and their shares are not offered to or traded with the general public. Transfers of shares are typically restricted, and these companies are not required to be listed on a stock exchange. This setup also means shareholders have limited liability—their personal assets aren’t at risk beyond what they invested. So, the statement that its shares cannot be bought by the general public is true because private limited companies keep ownership private and do not market shares to everyday investors. The other statements don’t fit the nature of a private limited company: selling shares to the general public would make it a public company; unlimited liability would contradict the concept of a private limited company; and being listed on a stock exchange isn’t required for a private company and many stay unlisted.

Private limited companies raise capital from a relatively small group of private investors, and their shares are not offered to or traded with the general public. Transfers of shares are typically restricted, and these companies are not required to be listed on a stock exchange. This setup also means shareholders have limited liability—their personal assets aren’t at risk beyond what they invested.

So, the statement that its shares cannot be bought by the general public is true because private limited companies keep ownership private and do not market shares to everyday investors.

The other statements don’t fit the nature of a private limited company: selling shares to the general public would make it a public company; unlimited liability would contradict the concept of a private limited company; and being listed on a stock exchange isn’t required for a private company and many stay unlisted.