R6

Question 1

Single owner; owner has unlimited personal liability; taxes passed through; business dies when owner fires or decides to stop business

Answer 1

SOLE PROPRIETORSHIP

Question 2

One of more individuals/entities; members have limited personal liability; taxes pass through on default, but can elect to be taxed as a corporation; continuity of membership is not dependent on one member

Answer 2

LIMITED LIABILITY COMPANY (LLC)

Question 3

Two or more individuals/entities; general partners have unlimited personal liability and the limited partners have limited personal liability; continuity depends on partnership agreements

Answer 3

PARTNERSHIPS

Question 4

Two or more individuals/entities; limited liability for business debts vary by state; pass through taxation; compliance with state laws, often used by professionals; continuity depends on partnership agreement

Answer 4

LIMITED LIABILITY PARTNERSHIPS (LLP)

Question 5

One it more general partners and limited partners; general partners have unlimited liability, limited partners have limited liability; pass through taxation; continuity subject to terms of partnership agreement

Answer 5

LIMITED PARTNERSHIP (LP)

Question 6

Up to 100 shareholders (all must be US citizens/residents); shareholders have limited personal liability; pass through taxation (avoids double taxation like a C corp); must file IRS form 2553 for formation and dissolution; must adhere to corporate formalities; perpetual existence (doesn’t depend on any shareholder)

Answer 6

S CORP

Question 7

Unlimited number of shareholders (can be foreign and organizations); shareholders have personal limited liability; subject to corporate tax (double taxation); lots of paperwork to form and dissolve; strict corporate governance rules; status not effected by changes in shareholders

Answer 7

C CORP