Business Structures Review

Front

What does "sole" mean?

Back

one

Answer explanation

The term 'sole' means 'one' or 'only.' It is often used to indicate exclusivity, as in 'the sole reason.' The other options do not relate to this meaning.

Front

Which business type is the EASIEST to create? Options: LLC, Sole proprietorship, Partnership, Nonprofit Entity, S Corporation

Back

Sole proprietorship

Answer explanation

A sole proprietorship is the easiest business type to create because it requires minimal paperwork and no formal registration, allowing individuals to start their business quickly and with less cost compared to other structures.

Front

Is unlimited liability a good thing or a bad thing?

Back

bad

Answer explanation

Unlimited liability is considered bad because it exposes business owners to personal financial risk. If the business incurs debt or legal issues, owners may have to use personal assets to cover those liabilities.

Front

What does "unlimited liability" mean?

Back

your personal assets are also at risk

Answer explanation

'Unlimited liability' means that your personal assets are also at risk if the business incurs debt or legal issues, making you personally responsible for the business's obligations.

Front

Can a partnership only have 1 owner?

Back

No

Answer explanation

A partnership, by definition, involves two or more individuals who share ownership and responsibilities. Therefore, it cannot have only one owner, making the correct answer 'No'.

Front

Can a partnership have more than 2 owners?

Back

Yes

Answer explanation

Yes, a partnership can have more than 2 owners. In fact, partnerships can consist of multiple partners, allowing for a diverse range of ownership and shared responsibilities.

Front

What type of liability does a partnership have? Is this good or bad?

Back

unlimited liability - bad

Answer explanation

A partnership has unlimited liability, meaning partners are personally responsible for all debts. This is considered bad as it puts personal assets at risk if the business fails.

Front

What type of tax situation does an S Corporation have?

Back

Special tax advantage

Answer explanation

An S Corporation enjoys a special tax advantage by allowing income to pass through to shareholders, avoiding double taxation at the corporate level. This makes it a favorable tax situation for many small businesses.

Front

What type of tax situation occurs in a Limited Liability Company?

Back

Pass through taxation (taxes get passed onto the owners)

Answer explanation

In a Limited Liability Company (LLC), income is typically subject to pass through taxation, meaning profits and losses are reported on the owners' personal tax returns, avoiding double taxation at the corporate level.

Front

Corporations have what kind of liability?

Back

Limited Liability

Answer explanation

Corporations have limited liability, meaning their owners are not personally responsible for the company's debts. This protects personal assets, unlike unlimited liability where owners are fully liable for all debts.