Asked by Iqbal Qayum on Jun 16, 2024
Verified
Which of the following is true of a limited liability corporation?
A) It is commonly identified by the "Inc." designation in a name.
B) It consists of a general partner and one or more "limited" partners who do not participate in day-to-day business management.
C) The business owner is personally liable for business debts and claims.
D) For tax purposes, it functions as a sole proprietorship in the case of a single owner.
E) It involves the owners going into debt by borrowing money from another person, bank, or financial institution.
Limited Liability Corporation
A company model that unites the advantage of pass-through taxation seen in sole proprietorships and partnerships with the limited liability protection offered by corporations.
Sole Proprietorship
A type of enterprise that is owned and run by one person, where there is no legal distinction between the owner and the business entity.
Tax Purposes
Considerations or actions taken to comply with tax laws or to optimize tax liabilities and benefits.
- Identify the legal safeguards and tax consequences associated with various business entities.
Verified Answer
HA
Hailey ArguetaJun 18, 2024
Final Answer :
D
Explanation :
Limited Liability Corporations (LLCs) are treated as pass-through entities for tax purposes, meaning if there is a single owner, it can be taxed as a sole proprietorship. This allows profits and losses to be reported on the owner's personal tax returns, avoiding double taxation.
Learning Objectives
- Identify the legal safeguards and tax consequences associated with various business entities.