Which of the following is true about limited liability companies?

Limited liability companies are characterized by the principle that shareholders have limited liability, meaning that their financial responsibility for the company's debts is restricted to the amount they have invested in the company. This concept is essential for encouraging investment, as it protects shareholders from personal financial risk beyond what they have contributed in share capital. Thus, in a scenario where a company faces insolvency, shareholders are only liable for their unpaid shares, and their personal assets are protected from creditors pursuing the company's debts.

This fundamental principle distinguishes limited liability companies from other business structures where owners might be personally liable for company debts. Adherence to formal regulations and structures is critical for the proper functioning of a limited liability company and does not align with the idea of minimal formalities in its formation. Therefore, options that suggest shareholders are personally liable, or that a limited liability company can be established without formal structure or statutory adherence, do not accurately reflect the inherent characteristics of limited liability companies.