Washington Life Producer Practice Exam

Which type of company is owned by its shareholders?

1. Mutual

2. Stock

3. Non-profit

4. Fraternal

The correct answer is: Stock

The type of company that is owned by its shareholders is a stock company. Stock companies are structured in a way that individuals or entities purchase shares, thereby becoming shareholders with an ownership stake in the company. These shareholders have the right to vote on company matters and may receive dividends based on the company's profits, reflecting their investment in the ownership of the business. In contrast, mutual companies are typically owned by policyholders, not shareholders, and focus on serving their members by providing insurance without the intent to generate profits for external shareholders. Non-profit organizations do not have owners in the traditional sense; they operate to fulfill a charitable mission rather than to make a profit for shareholders. Fraternal organizations are specialized non-profit entities that offer insurance among other benefits but are not owned by shareholders in a stock-like structure. Thus, the concept of ownership through shares distinctly defines stock companies as the correct answer in this scenario.