A business structure that can issue two types of stock to investors is which?

A business structure that can issue two types of stock to investors is which?

• A. Sole Proprietorship
• B. Partnership
• C. C Corporation
• D. Limited Liability Company

Answer: (C)

Stock represents ownership in a business, and the ability to issue stock to investors comes from the business being a separate legal entity. A corporation fits this, because it can issue shares to shareholders to raise capital. In particular, a C corporation can create multiple stock classes, such as common stock and preferred stock, each with different rights on dividends, voting, and liquidation, which provides flexibility for attracting varied investors. Other structures don’t issue stock in the same way: sole proprietorship is owned by one person, partnerships are owned by partners, and an LLC issues membership interests (not stock) and may have different classes of those interests but still not “stock.” So the structure that best fits the description is the corporation, especially the standard C corporation with the ability to issue more than one class of stock.

Stock represents ownership in a business, and the ability to issue stock to investors comes from the business being a separate legal entity. A corporation fits this, because it can issue shares to shareholders to raise capital. In particular, a C corporation can create multiple stock classes, such as common stock and preferred stock, each with different rights on dividends, voting, and liquidation, which provides flexibility for attracting varied investors. Other structures don’t issue stock in the same way: sole proprietorship is owned by one person, partnerships are owned by partners, and an LLC issues membership interests (not stock) and may have different classes of those interests but still not “stock.” So the structure that best fits the description is the corporation, especially the standard C corporation with the ability to issue more than one class of stock.