Which term best describes a company in which more than 50% of the stock is owned by five or fewer individuals?

Which term best describes a company in which more than 50% of the stock is owned by five or fewer individuals?

• A. Closely Held Corporation
• B. Publicly Traded Corporation
• C. Nonprofit Organization
• D. Private Foundation

Answer: (A)

Ownership concentrated in a small group is what this item is testing. A closely held corporation describes a company where a small number of owners—here, five or fewer individuals—control the majority of the stock. When more than half of the shares are held by a few, that group has tight, centralized control over decisions, which is the hallmark of a closely held firm. This contrasts with a publicly traded corporation, whose shares are dispersed among many public investors on the market and not controlled by a few individuals. Nonprofit organizations and private foundations don’t have stock ownership at all, so the ownership-concentration idea doesn’t apply to them.

Ownership concentrated in a small group is what this item is testing. A closely held corporation describes a company where a small number of owners—here, five or fewer individuals—control the majority of the stock. When more than half of the shares are held by a few, that group has tight, centralized control over decisions, which is the hallmark of a closely held firm. This contrasts with a publicly traded corporation, whose shares are dispersed among many public investors on the market and not controlled by a few individuals. Nonprofit organizations and private foundations don’t have stock ownership at all, so the ownership-concentration idea doesn’t apply to them.