Understanding Business Entities

What is a key advantage of a sole proprietorship?

• Limited liability for losses

• Avoidance of double taxation

• Requirement of governmental filing

• Automatic dissolution upon the owner's death

Which entity is formed by default if a single person conducts business without filing with the state?

• Sole Proprietorship

• Corporation

• Partnership

• Limited Liability Company (LLC)

What is a characteristic of general partnerships?

• Automatic dissolution upon a partner's death

• Equal rights to management and control for all partners

• No need for any filings with the state

• Limited liability for all partners

What distinguishes a limited partnership from a general partnership?

• It requires filing of a certificate with the state

• All partners have unlimited liability

• It cannot be dissolved by the death of a partner

• All partners have equal management rights

What is unique about the taxation of an S corporation?

• It is taxed as a partnership

• It cannot pass losses to shareholders

• It allows for double taxation avoidance

• It is exempt from all federal taxes

Which business entity combines the benefits of partnership and corporation laws?

• General Partnership

• Limited Liability Company (LLC)

• S Corporation

• Limited Partnership

What is required for a corporation to be considered an S corporation?

• Being a non-domestic corporation

• Having more than 100 shareholders

• Offering multiple classes of stock

• Filing a form 2553 with the IRS

Which entity is specifically designed for professional partnerships like law firms?

• Limited Liability Limited Partnership (LLLP)

• S Corporation

• Limited Partnership

• Limited Liability Partnership (LLP)

What is a main characteristic of a corporation?

• It can independently sue and be sued

• Shareholders have unlimited liability

• Management is decentralized

• It is not a separate legal entity from its owners

What happens to a sole proprietorship upon the death of the owner?

• It automatically becomes a partnership

• It becomes a corporation

• It continues to operate under a predetermined successor

• It is dissolved