Type of company that assumes limited liability, and legal protection for their shareholders, but that puts certain restrictions on its ownership. These restrictions are defined in the by-laws or company and are designed to prevent a hostile takeover bid. The main limitation of the right of ownership are:
1. Shareholders can not sell or transfer their shares without first offering them to the other shareholders on the purchase. 2. Shareholders can not offer its shares to the public for the stock market. 3. The number of shareholders can not exceed a fixed number (usually 50).
Limited Liability: This means that if the experience of financial difficulties due to the normal course of business and personal assets of the shareholders will not be in danger of being withdrawn creditors. The continuity of the existence of a business does not depend on the status of the owner. The minimum number of shareholders have to start a business is only 2. More capital can be raised to the maximum number of shareholders allowed 50. The scope of expansion is higher because it is easy to raise capital from financial institutions and benefit of limited liability.
Growth may be limited because of the maximum permitted only 50 shareholders. Shares of limited liability company can not be sold or given to anyone else without the consent of other shareholders.