What type of business is owned by stockholders who share in its profits without being responsible for its debts?

What type of business is owned by stockholders who share in its profits without being responsible for its debts?

• A. Cooperative
• B. Sole proprietorship
• C. Partnership
• D. Corporation

Answer: (D)

The correct answer is a corporation, which is characterized by its structure that allows for ownership through stockholders. In a corporation, stockholders invest in the business by purchasing shares, which represent their ownership in the entity. One of the key advantages of this structure is limited liability; stockholders are not personally responsible for the corporation's debts. This means that if the corporation faces financial difficulties or goes bankrupt, the personal assets of the stockholders are protected, and they can only lose the amount they invested in shares. This feature allows corporations to raise significant capital for expansion and development, as investors are more likely to invest when their risk is limited to their investment in stocks. This business structure also provides continuity; the corporation can continue to exist independently of its owners, facilitating long-term planning and stability.

The correct answer is a corporation, which is characterized by its structure that allows for ownership through stockholders. In a corporation, stockholders invest in the business by purchasing shares, which represent their ownership in the entity. One of the key advantages of this structure is limited liability; stockholders are not personally responsible for the corporation's debts. This means that if the corporation faces financial difficulties or goes bankrupt, the personal assets of the stockholders are protected, and they can only lose the amount they invested in shares.

This feature allows corporations to raise significant capital for expansion and development, as investors are more likely to invest when their risk is limited to their investment in stocks. This business structure also provides continuity; the corporation can continue to exist independently of its owners, facilitating long-term planning and stability.