Which term describes a business owned by multiple shareholders sharing profits and liabilities?

• A. Corporation
• B. Joint stock company
• C. LLC
• D. Partnership

Answer: (B)

This question is about how ownership and risk are built into a business through shares. A joint stock company is a business owned by many shareholders who hold pieces of the company as shares. Capital is raised by selling these shares, and profits are shared with shareholders in proportion to their stake. At the same time, the liability of the owners is tied to the company itself, not to their personal assets, so investors risk only the amount they invested.

That combination—multiple owners through transferable shares, profit distribution via dividends, and liability limited to the investment—fits the description of a joint stock company most precisely. A partnership, while also involving shared profits, uses partners rather than shareholders and typically involves personal liability for debts. An LLC uses members instead of shareholders and also emphasizes limited liability, not separate share ownership. A corporation is close in idea, but the term joint stock company specifically emphasizes the share-based ownership structure and how capital is raised through selling shares.