Arizona State Board Nail Technology Practice Exam

Which type of business structure is most likely to raise capital by offering shares of stock?

1. Partnership

2. Sole proprietorship

3. Corporation

4. Limited liability company

The correct answer is: Corporation

The corporation is the business structure most likely to raise capital by offering shares of stock. This is because a corporation is legally considered a separate entity from its owners, which allows it to issue shares to the public or private investors. When a corporation sells shares, it can raise significant amounts of capital, which can be used for expansion, research and development, and operational needs. This ability to issue stock makes corporations attractive for investors, as they can potentially earn dividends and benefit from stock price appreciation. Furthermore, shareholders have a limited liability, meaning they are not personally responsible for the corporation's debts beyond their investment in shares, which encourages more investment. In contrast, other business structures, such as partnerships and sole proprietorships, do not have the ability to issue stock. While limited liability companies (LLCs) can raise funds, they typically do so through private investment rather than public stock offerings, which limits their capacity to attract large-scale investment compared to corporations.