Joji is a 37-year-old married business owner. He runs a dry cleaning service with three locations in Toledo, Ohio. His personal obligations are the home that he owns with his wife, who works for a large financial consulting firm; the healthcare of his family; and his commitment toward saving for his three children's college educations. Joji knows that two of his locations require a large infusion of cash to pay for new and expensive dry cleaning equipment. Although his wife's job provides the family with health insurance, it also places the family in a higher income tax bracket. Joji would certainly like to minimize his taxes. Which of the following forms of business ownership would you suggest for him?
A) Joji should consider a sole proprietorship due to the fact that it pays its own taxes and it has limited liability.
B) Joji should consider a sole proprietorship due to the fact that it has unlimited liability and it will protect the family's personal assets.
C) Joji should consider a corporation because he can avoid the negative aspect of limited liability. Corporations are always taxed at a lower rate than individuals.
D) Joji should consider a limited liability company because he will only be liable for what he has invested in the business. His personal assets will be protected, and he can be taxed like a sole proprietorship.

Question

Quizplus · Accepted Answer

LLC provides the owner(s) with limited liability, which means the owners are only liable for the funds they have invested in the business. Personal assets are protected. It also permits the owner to account for his earnings on his individual tax return. The company does not submit a tax return. Company earnings are passed through to the owner's individual return, just like a sole proprietorship or a general partnership.

Joji Is a 37-Year-Old Married Business Owner