Question

1. why would a company owner want to be established as a limited liability company?

a. to keep from paying taxes.
b. so that personal assets could be protected from creditors and liabilities.
c. to borrow more funds to grow the business.
d. double taxation

Explanation:

• Option a: LLCs still pay taxes, so this is incorrect.
• Option b: A key feature of a Limited Liability Company (LLC) is that the owners' personal assets are protected from the company's creditors and liabilities. This is a primary reason for forming an LLC.
• Option c: Forming an LLC doesn't directly enable borrowing more funds; borrowing depends on factors like creditworthiness, not just the business structure.
• Option d: Double taxation is a disadvantage of corporations (C - corps), not a reason to form an LLC (LLCs have pass - through taxation in most cases).

Answer:

b. So that personal assets could be protected from creditors and liabilities.