Future Business Leaders of America (FBLA) Agribusiness Practice Test

Which statement is true about the transferability of ownership in a corporation?

1. Shares cannot be sold

2. Shares require approval for transfer

3. Shares are freely transferable by the shareholder

4. Ownership cannot be transferred at all

The correct answer is: Shares are freely transferable by the shareholder

The true statement about the transferability of ownership in a corporation is that shares are freely transferable by the shareholder. This characteristic is one of the key features of corporations. When someone owns shares in a corporation, they have the right to sell or transfer their shares to others without needing additional permissions or approvals from the corporation or other shareholders. This liquidity is attractive to investors, as it provides them with the flexibility to exit their investment whenever they choose. In the context of a corporation, this free transferability improves marketability and facilitates investment. It stands in contrast to ownership structures like partnerships or sole proprietorships, where ownership transfer can be far more complicated and may require consent from other partners or stakeholders. Other options imply restrictions on this transferability, which do not align with the general principles of corporate ownership. While there can be specific circumstances in certain private corporations where transferability is limited, the general rule for publicly traded corporations is that shares can be traded freely on the stock market.