FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Transcribed Image Text:**Question:**
Which business entity could have common stock authorized?
**Options:**
- A. a sole proprietorship
- B. a partnership
- C. a limited liability company
- D. a corporation
- E. All of the above could theoretically have common stock authorized
**Explanation:**
This multiple-choice question aims to identify which type of business entity can issue common stock. Generally, common stock is associated with corporations. A brief explanation of each option is useful to understand why one is more applicable:
- **Sole Proprietorship:** An individual-owned business where stock is not issued.
- **Partnership:** A business owned by two or more people, typically not issuing stock.
- **Limited Liability Company (LLC):** Can have members but does not issue traditional stock like a corporation.
- **Corporation:** A business entity that can issue stock to represent ownership shares.
- **All of the above:** This option suggests that theoretically, these entities could issue stocks, which is not typical in practice.
Expert Solution
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When a group of people with a shared objective form a corporation, it is known as a corporation.
Such a collection of people owns common stock, which is a type of company.The term "corporation" refers to legal entity . Corporations have all of the same rights and responsibilities as people. Corporations can acquire assets in their own name, engage into contracts, sell their own assets and shares, and so on. One of the most important features of a company is that it has limited liability. Shareholders are the company's owners.
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