Question

many professionals such as attorneys, doctors, and dentists use llps (limited liability partnerships) commonly when forming their practice. what potential benefit might xin and shawn also receive from this business structure if they were to form an llp?

a) limited risk for other partners mistakes

b) a lower corporate tax rate

c) sharing of liabilities equally

d) limited personal conflicts

e) none; a sole proprietorship would be better.

Explanation:

To solve this, we analyze each option based on LLP (Limited Liability Partnership) characteristics:

• Option A: In an LLP, a partner is not personally liable for the mistakes (negligence, malpractice) of other partners. This is a key benefit of an LLP.
• Option B: LLPs typically have pass - through taxation (income is taxed at the partner level, not the entity level), so they don't have a corporate tax rate. So this is incorrect.
• Option C: In an LLP, liability is not necessarily shared equally, and the main benefit is not equal sharing but limited liability for others' mistakes. So this is incorrect.
• Option D: An LLP does not inherently limit personal conflicts between partners. So this is incorrect.
• Option E: A sole proprietorship has unlimited personal liability, while an LLP has limited liability benefits, so this is incorrect.

Answer:

A) limited risk for other partners' mistakes