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? sole proprietorship limited liability company s - corporation 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? sole proprietorship limited liability company s - corporation c - corporation

Answer

Brief Explanations:

  1. Sole Proprietorship: Not suitable as there are four partners. Also, the owner has unlimited liability and no protection from business liabilities.
  2. Limited Liability Company (LLC): Offers limited - liability protection like corporations. It has pass - through taxation, avoiding double - taxation. It can have multiple members (partners in this case).
  3. S - Corporation: Has limited liability and pass - through taxation. However, there are restrictions on the number and type of shareholders.
  4. C - Corporation: Subject to double - taxation (corporate income tax and then shareholders' tax on dividends), which is not desired here.

Answer:

B. Limited Liability Company