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? limited liability company sole proprietorship s-corporation c-corporation

Explanation:

To determine the legal structure, we analyze each option:

• Sole Proprietorship: Involves one owner, but here there are four partners, so this is invalid.
• C - Corporation: Faces double taxation (corporate and personal income tax on dividends), which the business wants to avoid.
• S - Corporation: Avoids double taxation, allows shareholders (up to 100), and provides limited liability. The business has four partners (shareholders), doesn’t plan to sell shares publicly, and wants limited liability and no double taxation—this fits.
• Limited Liability Company (LLC): While it also offers limited liability and pass - through taxation, the question’s context (shareholders, not selling to public) aligns more with S - Corp’s shareholder - based structure for a small business with partners. However, re - evaluating: Wait, S - Corp is a corporation structure with pass - through. But LLC can also have members as shareholders - like. But the key points: no double tax, limited liability, shareholders (partners), not public. S - Corp: shareholders, no double tax (income passes to shareholders, taxed at individual rate), limited liability. C - Corp: double tax. Sole Prop: single owner. So S - Corp is correct as it meets all: multiple shareholders (4 partners), no double tax, limited liability, not public.

Answer:

S - Corporation