What is the difference between a stock corporation and a non-stock corporation?

The distinction between a stock corporation and a non-stock corporation is fundamentally rooted in their structure and purpose. Stock corporations are characterized by their ability to issue shares to stockholders, which provides a mechanism for raising capital. Stockholders invest in the corporation by purchasing shares, and in return, they receive ownership interests, which may entitle them to dividends and voting rights in corporate decisions.

In contrast, non-stock corporations do not issue shares and, therefore, do not have stockholders. Instead, they typically have members who contribute to the organization’s mission and may participate in governance but do not possess ownership stakes like stockholders in stock corporations. Non-stock corporations often operate as nonprofit entities, focusing more on social, educational, or charitable activities rather than generating profit for shareholders.

By understanding these foundational differences, one can appreciate the varying objectives and operational frameworks of these two types of corporations. This clarity is vital in distinguishing their legal treatment, governance structure, and financial models. Other options presented do not accurately convey the core differences in how these entities function or their structural principles.