Question

you are forming a new company that delivers food to students across college campuses. you have a number of partners, but your primary goals are to avoid personal liability and double taxation. you want to pay each of the partners based on the percentage of the company that they own. you could accomplish this by forming a(n):

d. s corporation.
b. partnership.
a. c corporation.
c. llc

Explanation:

Analyze the business requirements

The primary goals are to avoid personal liability and avoid double taxation while distributing profits to multiple partners based on ownership percentage.

Evaluate a partnership

Using the Business Partnerships knowledge point, a general partnership does not protect partners from personal liability, which violates the first primary goal.

Evaluate a C corporation

Using the Double Taxation knowledge point, a standard C corporation provides limited liability but is subject to double taxation on its corporate income and shareholder dividends.

Evaluate an S corporation and LLC

Using the S Corporation and Limited Liability Company knowledge points, both structures offer limited liability protection and pass-through taxation (avoiding double taxation). However, an S corporation has strict ownership restrictions (such as a limit on the number and type of shareholders). A Limited Liability Company (LLC) is the most flexible structure that perfectly achieves both goals of avoiding personal liability and avoiding double taxation for multiple owners.

Select the correct option

Comparing the choices, option (c) LLC is the most direct and standard business structure used to accomplish these specific goals.

Answer:

• d. S corporation.
• b. Partnership.
• a. C corporation.
• c. LLC (Correct answer)