What is the term for an entity organized under state or federal statutes with ownership divided into shares of stock?

• A. Corporation
• B. Partnership
• C. Proprietorship
• D. Association

Answer: (A)

Ownership divided into shares of stock, organized under state or federal statutes, describes a corporation. A corporation is a separate legal entity created by law, with ownership held through shares of stock that can be bought and sold by shareholders. This structure allows the company to raise capital by issuing stock and provides limited liability to its owners, who are not personally liable for the corporation’s debts. The entity can continue independently of its owners, thanks to perpetual existence and a formal governance framework (board of directors and officers).

In contrast, a partnership is formed by an agreement among owners and involves shared management and personal liability for the partners; ownership isn’t in transferable stock. A proprietorship is owned by a single individual, with no separate legal entity and with the owner bearing unlimited personal liability. An association is a general term for a group formed for a purpose, but it does not inherently imply a stock-based ownership structure or a separate legal entity like a corporation.