Future Business Leaders of America (FBLA) Marketing Practice Test

Which of the following describes a business owned by shareholders?

1. Corporation

2. Partnership

3. Sole proprietorship

4. Cooperative

The correct answer is: Corporation

A business owned by shareholders is known as a corporation. In a corporation, individuals or entities can purchase shares of stock, which represents ownership in the company. This ownership structure allows shareholders to benefit from the company's profits in the form of dividends and share price appreciation, as well as to participate in important decisions through voting rights at shareholder meetings. Corporations are distinct in that they operate as separate legal entities from their owners, providing limited liability protection to shareholders. This means that shareholders are typically not personally liable for the debts and liabilities of the corporation. As a result, the corporate structure is a popular form for larger businesses that seek to raise capital from the public or private investors while also wanting to protect individual shareholders from financial risk. In contrast, partnerships and sole proprietorships involve different structures. Partnerships involve two or more individuals sharing ownership and responsibilities, while a sole proprietorship is owned by a single individual without the possibility of shareholders. Cooperatives are member-owned businesses that operate for mutual benefit, usually focusing on a shared service or product among members rather than maximizing profits for individual shareholders. Thus, the concept of ownership through shares specifically points to the corporate structure, making it the correct answer.