Sally and Alicia are equal general partners in a business. They are content with their current management and tax situation but are uncomfortable with their unlimited liability. Which form of business entity should they consider as a replacement to their current arrangement assuming they wish to remain the only two owners of the business?
A) Sole proprietorship
B) Joint stock company
C) Limited partnership
D) Limited liability company
E) Corporation

Question

Quizplus · Accepted Answer

A limited liability company (LLC) would provide Sally and Alicia with limited liability protection while maintaining their current management and tax situation, as well as their equal partnership. It is a flexible type of business entity that allows for pass-through taxation, meaning that the business's income is not taxed at the entity level but rather flows through to the owners' personal income tax returns. This would avoid double taxation, which can occur with a corporation. Additionally, unlike a limited partnership, where there must be at least one general partner with unlimited liability, an LLC allows all owners to have limited liability protection.

Sally and Alicia Are Equal General Partners in a Business