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What is the primary reason a sole proprietorship is not a viable business structure for a for-profit subsidiary of a tax-exempt organization?
What is the primary reason a sole proprietorship is not a viable business structure for a for-profit subsidiary of a tax-exempt organization?
- It requires the tax-exempt organization to handle business operations directly (correct)
- It is only available for non-profit organizations
- It does not provide limited liability protection
- It is not a separate legal entity
Which of the following business structures is not a viable option for a for-profit subsidiary of a tax-exempt organization?
Which of the following business structures is not a viable option for a for-profit subsidiary of a tax-exempt organization?
- Limited Liability Company (LLC)
- Sole Proprietorship (correct)
- S Corporation
- C Corporation
What is a key characteristic of a sole proprietorship that makes it unsuitable for a for-profit subsidiary of a tax-exempt organization?
What is a key characteristic of a sole proprietorship that makes it unsuitable for a for-profit subsidiary of a tax-exempt organization?
- It requires the tax-exempt organization to handle business operations directly (correct)
- It is a separate legal entity
- It provides limited liability protection
- It is only available for small businesses
Why would a tax-exempt organization want to avoid a sole proprietorship structure for its for-profit subsidiary?
Why would a tax-exempt organization want to avoid a sole proprietorship structure for its for-profit subsidiary?
What is the main reason a sole proprietorship is not a viable option for a for-profit subsidiary of a tax-exempt organization, according to Hopkins (2017)?
What is the main reason a sole proprietorship is not a viable option for a for-profit subsidiary of a tax-exempt organization, according to Hopkins (2017)?
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Study Notes
Business Structure for a For-Profit Subsidiary
- A for-profit subsidiary of a tax-exempt organization cannot be a sole proprietorship.
- This is because a sole proprietorship would require the tax-exempt organization to handle business operations directly, negating the benefit of having a separate corporation.
- Viable business structures for a for-profit subsidiary of a tax-exempt organization include:
- C Corporation
- Limited Liability Company (LLC)
- S Corporation
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