Sam,Alfredo,and Juan want to start a small U.S.business.Juan will fund the venture but wants to limit his liability to his initial investment and has no interest in the daily operations.Sam will contribute his full efforts on a daily basis but has limited funds to invest in the business.Alfredo will be involved as an active consultant and manager and will also contribute funds.Sam and Alfredo are willing to accept liability for the firm's debts as they feel they have nothing to lose by doing so.All three individuals will share in the firm's profits and wish to keep the initial organizational costs of the business to a minimum.Which form of business entity should these individuals adopt?
A)sole proprietorship
B)joint stock company
C)limited partnership
D)general partnership
E)corporation

Question

Quizplus · Accepted Answer

A limited partnership would allow Juan to limit his liability to his initial investment, while Sam and Alfredo can be general partners who are actively involved in the daily operations of the business and are willing to accept liability for the firm's debts. Additionally, all three individuals can share in the firm's profits. This form of business entity would also allow the initial organizational costs to be kept to a minimum. A sole proprietorship would not provide the limited liability that Juan desires, and a general partnership would make all partners liable for the firm's debts. A joint stock company and corporation would likely involve higher organizational costs and formalities than the group wishes to undertake.

Sam,Alfredo,and Juan Want to Start a Small U