Question

question 3

haley is expanding her tax preparation business and wants to reorganize it. she wants to better protect her personal assets from any liabilities associated with the business, and she wants to pay a lower tax rate on her business income. she also believes her business will benefit from oversight from a board of directors.

which form of business structure would clearly meet haleys needs?

limited liability partnership
corporation
sole proprietorship
partnership

Explanation:

Analyze Haley's specific business requirements

Haley has three distinct requirements for her reorganized business:

1. Asset Protection: She wants to protect personal assets from business liabilities.
2. Tax Advantage: She wants to pay a lower tax rate on business income.
3. Governance: She wants oversight from a board of directors.

Evaluate the options against her requirements

• Sole Proprietorship: Offers no personal liability protection and has no board of directors.
• Partnership / Limited Liability Partnership (LLP): While an LLP provides liability protection, partnerships do not have a formal board of directors structure.
• Corporation: A corporation is a separate legal entity providing strong personal liability protection. It is governed by a board of directors. Historically, corporate tax rates can offer advantages depending on the structure, and it uniquely satisfies the board of directors requirement.

Determine the best matching business structure

Only a Corporation inherently features a formal board of directors to oversee operations while providing robust limited liability protection for personal assets.

Answer:

• Limited liability partnership
• Corporation (Correct answer)
• Sole proprietorship
• Partnership