Future Business Leaders of America (FBLA) Agribusiness Practice Test

What type of business is characterized by shares owned by a few shareholders and is not traded on exchanges?

1. Partnership

2. Closely held

3. Publicly traded

4. Limited liability

The correct answer is: Closely held

The correct answer, closely held, refers to a type of business entity where the shares are owned by a small number of shareholders and are not available for trading on public exchanges. This structure is often chosen by family-owned businesses or small companies where ownership is concentrated among a few individuals. These businesses typically do not have the same regulatory requirements as publicly traded companies, which makes them simpler and more flexible in terms of management and decision-making. Closely held companies often retain control within a small group, enabling close relationships among owners and quicker decision-making processes. This contrasts with publicly traded companies, where shares are widely held and can be freely bought and sold on the stock market, giving them a different operational and regulatory framework. In a partnership, ownership is shared among partners, but it does not specifically reference shares or the trading aspect. Publicly traded companies distinctly operate on stock exchanges, and limited liability describes a legal structure that protects personal assets of owners but does not indicate the number of shareholders or stock trading status.