Question

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
c-corporation
s-corporation

Explanation:

• Sole Proprietorship: Only one owner, unlimited liability. Not suitable as there are four partners.
• Limited Liability Company (LLC): Pass - through taxation (avoids double - taxation), limited liability. But not exactly like a corporation in some aspects.
• C - Corporation: Double - taxation (corporate income tax and shareholder dividend tax). Not desired as the user doesn't want double - taxation.
• S - Corporation: Pass - through taxation (avoids double - taxation), limited liability like a corporation, can have shareholders (up to 100, and here there are four partners as shareholders), and is not publicly traded.

Answer:

S - Corporation