Which of the following describes a limited company?

A limited company is characterized by its separate legal identity from its owners. This means that the company itself can enter into contracts, own property, and be sued independently of its shareholders. The liability of the owners or shareholders is limited to the amount they have invested in the company, protecting their personal assets from business debts. This structure provides a layer of security for the owners and is a primary reason why entrepreneurs choose to incorporate their businesses.

In contrast to a limited company, an unincorporated business organization, such as a sole proprietorship or partnership, does not have a distinct legal identity. This means that the owners are personally responsible for any debts incurred by the business. Similarly, partnerships with unlimited liability expose partners to potential personal liability for the debts of the business, while nonprofit organizations typically do not have shareholders and are structured to fulfill a charitable mission rather than profit generation.