What is a private limited company?

A private limited company is defined as a company that has limited liability, meaning that the owners (or shareholders) are not personally responsible for the company's debts beyond the amount they have invested in the company. This protects personal assets in the event that the business struggles financially. Additionally, a private limited company is characterized by having restricted share trading, which means that its shares are not available on the public stock exchange and typically can only be sold or transferred with the agreement of other shareholders. This structure allows for a smaller group of people to manage ownership and maintains a level of privacy that is not available to public companies.

In contrast, a business owned by one shareholder is not accurate because a private limited company can have multiple shareholders. A business with shares available to the public describes a public limited company, not a private limited company, which limits its share availability. Lastly, a non-profit organization operates on a different model altogether, as it does not aim to distribute profits to shareholders and focuses instead on fulfilling its mission. Therefore, the characteristics of limited liability combined with restricted share trading correctly define a private limited company.