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
s corporation
c corporation

Explanation:

1. Analyze each option:

• Sole Proprietorship: No partners, personal liability, not suitable as there are four partners.
• Limited Liability Company (LLC): While offers liability protection, the question focuses on corporate - like benefits (shareholders) and avoiding double taxation with no public share sale. LLC is not the best fit here.
• C - Corporation: Subject to double taxation (corporate income tax and shareholder dividend tax), which is not desired.
• S - Corporation: Allows for multiple shareholders (up to 100), provides limited liability protection, and is pass - through taxed (avoids double taxation), and does not sell ownership shares to the public. This matches the requirements of the small business with four partners, wanting liability protection, no double taxation, and no public share sale.

Answer:

B. S - Corporation