DECA Sports and Entertainment Marketing Practice Exam

What type of business structure does a corporation represent?

1. A small partnership of individuals

2. A non-profit organization

3. Ownership represented by shares of stock

4. A sole proprietorship

The correct answer is: Ownership represented by shares of stock

A corporation represents a business structure where ownership is divided into shares of stock. This means that individuals can buy shares, thereby becoming part owners of the corporation. Shareholders have a claim on a portion of the corporation's assets and earnings, which underscores the idea of multiple owners participating in the business. Additionally, a corporation is a legally distinct entity separate from its owners, providing them with limited liability protection. This means that the personal assets of the shareholders are typically protected from debts and obligations incurred by the corporation. In contrast, the other options describe different business structures. A partnership involves two or more individuals sharing ownership and responsibilities, while a non-profit organization primarily exists to serve a public or mutual benefit rather than to generate profit for owners or shareholders. A sole proprietorship, on the other hand, is owned and operated by a single individual who bears all the risks and rewards of the business. Each of these structures has its unique characteristics, but only a corporation specifically denotes a structure with ownership represented by shares of stock.