What are the two types of limited company, and how are those by shares categorized?

What are the two types of limited company, and how are those by shares categorized?

• A. Limited by shares or limited by guarantee; those limited by shares may be private or public
• B. Not-for-profit and charity
• C. Public sector bodies and government entities
• D. Unlimited by shares and unlimited by guarantee

Answer: (A)

The main idea is that limited companies differ by how members’ liability is limited. There are two forms: one is limited by shares, where members’ liability is limited to the amount unpaid on their shares; the other is limited by guarantee, where members agree to contribute a fixed amount if the company winds up, but there is no share capital. Within the form that is limited by shares, there is a further categorization into private or public. Private companies limited by shares (Ltd) have shares that aren’t generally offered to the public, while public companies limited by shares (Plc) can have their shares offered on the open market. This distinction is why the categorization by shares matters for the limited-by-shares type.

The main idea is that limited companies differ by how members’ liability is limited. There are two forms: one is limited by shares, where members’ liability is limited to the amount unpaid on their shares; the other is limited by guarantee, where members agree to contribute a fixed amount if the company winds up, but there is no share capital.

Within the form that is limited by shares, there is a further categorization into private or public. Private companies limited by shares (Ltd) have shares that aren’t generally offered to the public, while public companies limited by shares (Plc) can have their shares offered on the open market. This distinction is why the categorization by shares matters for the limited-by-shares type.