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Questions and Answers
A sole proprietorship is owned and operated by a ______.
A sole proprietorship is owned and operated by a ______.
single individual
Partnerships are owned by two or more ______ who share the profits, losses, and liabilities.
Partnerships are owned by two or more ______ who share the profits, losses, and liabilities.
individuals
Limited Liability Companies provide ______ liability to its owners (members).
Limited Liability Companies provide ______ liability to its owners (members).
limited
LLCs can choose their tax treatment, either as a ______ or a corporation.
LLCs can choose their tax treatment, either as a ______ or a corporation.
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A partnership typically has ______ personal liability for its partners.
A partnership typically has ______ personal liability for its partners.
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Study Notes
Business Ownership Structures
Sole Proprietorship
- A business owned and operated by a single individual
- Simplest form of business ownership
- Owner has unlimited personal liability for business debts and obligations
- Income generated is reported on the owner's personal tax return (pass-through taxation)
Partnership
- A business owned by two or more individuals who share the profits, losses, and liabilities
- Partners have shared responsibility for the business
- Partners typically have unlimited personal liability
- Income generated is typically reported on the partners' personal tax returns (pass-through taxation)
Limited Liability Company (LLC)
- A flexible form of business that provides limited liability to its owners (members)
- Members' liability is limited to their investment in the LLC
- LLCs can choose their tax treatment, either as a partnership or a corporation
- Provides the flexibility of management
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