Explain the main characteristics of a limited company.

A limited company is a type of business structure that has its own legal identity, separate from its owners.

A limited company, also known as a private limited company, is a type of business structure that is legally separate from its owners. This means that the company can enter into contracts, own property, and sue or be sued in its own name. The owners of a limited company are not personally liable for the company's debts. Instead, their liability is limited to the amount they have invested in the company or guaranteed to the company.

One of the main characteristics of a limited company is its share capital. The share capital is the amount of money that the shareholders have invested in the company. Each shareholder owns a portion of the company, known as a share, which represents a fraction of the total share capital. The shareholders are entitled to a share of the company's profits, usually in the form of dividends.

Another key characteristic of a limited company is its governance structure. A limited company is run by its directors, who are appointed by the shareholders. The directors are responsible for the day-to-day management of the company and are accountable to the shareholders. The company's articles of association, a document that sets out the rules for running the company, govern the relationship between the shareholders and the directors.

Limited companies also have certain reporting and disclosure requirements. They must prepare annual financial statements, which must be audited if the company is large enough. These financial statements are public records and can be accessed by anyone. Limited companies must also file annual returns with the Companies House, which provide information about the company's directors, shareholders, and registered office.

In terms of taxation, a limited company pays corporation tax on its profits. The shareholders, on the other hand, may have to pay income tax on the dividends they receive from the company. However, they do not have to pay tax on the profits that the company retains.

IB Business Management Tutor Summary: A limited company is a business that exists separately from its owners, meaning it can do things like own property or go to court. Owners risk only what they've invested, not personal assets. It's funded by shareholder investments and run by directors. It must follow strict rules, including yearly financial reports. It pays corporation tax, while shareholders are taxed on dividends.