you need to create a legal structure for your small business. you would like some of the benefits enjoyed by…

you need to create a legal structure for your small business. you would like some of the benefits enjoyed by large corporations, but do not want to be taxed twice. you have four partners who will be shareholders. none of you plan to sell your ownership shares to the public, but do want to be protected from business liabilities. which legal structure should you set up for your business? limited liability company s - corporation sole proprietorship c - corporation

you need to create a legal structure for your small business. you would like some of the benefits enjoyed by large corporations, but do not want to be taxed twice. you have four partners who will be shareholders. none of you plan to sell your ownership shares to the public, but do want to be protected from business liabilities. which legal structure should you set up for your business? limited liability company s - corporation sole proprietorship c - corporation

Answer

Brief Explanations:

  1. A Limited - Liability Company (LLC) offers limited liability like large corporations and avoids double - taxation.
  2. An S - Corporation also provides limited liability and pass - through taxation to avoid double - taxation, and is suitable for small businesses with a limited number of shareholders not selling to the public.
  3. A Sole Proprietorship has unlimited liability, so it doesn't meet the requirement of protection from business liabilities.
  4. A C - Corporation is subject to double - taxation, which is not desired here. Between LLC and S - Corporation, S - Corporation is a more specific legal structure for small businesses with the given criteria.

Answer:

B. S - Corporation