Question

Which of the following statements reflects the transferability of ownership rights in a corporation? a) A stockholder must obtain permission from at least three other stockholders before selling shares. b) A stockholder may dispose of part or all of his shares. c) If a stockholder decides to transfer ownership, he must transfer all of his shares. d) A stockholder must obtain permission from the board of directors before selling shares.

Answer 1

Answer: Option B

Explanation: In simple words, a corporation refers to an entity which has its own separate legal identity from its owners. Generally these entities works on a very large scale and the ownership rights of such companies is divided into many shares which are hold by several different individuals.

The holders of stock of such entities gets return in form of dividend and can resell their shares for capital gain in an open market of securities. As the owner and the company are two different entities the owner is not liable to report for the action of selling shares to the company.