The electronic structure of the (LiYb)$^+$ molecular ion is investigated with two variants of the coupled cluster method restricted to single, double, and noniterative or linear triple excitations. Potential energy curves for the ground and excited states, permanent and transition electric dipole movements, and long-range interaction coefficients $C_4$ and $C_6$ are reported. The data is subsequently employed in scattering calculations and photoassociation studies. Feshbach resonances are shown to be measurable despite the ion's micromotion in the Paul trap. Molecular ions can be formed in their singlet electronic ground state by one-photon photoassociation and in triplet states by two-photon photoassociation; and control of cold atom-ion chemistry based on Feshbach resonances should be feasible. Conditions for sympathetic cooling of an Yb$^+$ ion by an ultracold gas of Li atoms are found to be favorable in the temperature range of 10$\,$mK to 10$\,$nK; and further improvements using Feshbach resonances should be possible. Overall, these results suggest excellent prospects for building a quantum simulator with ultracold Yb$^+$ ions and Li atoms. ; Comment: 13 pages, 13 figures, 2 tables