A group of investors plans to start a new business and wants to limit their personal liability while also dividing profits. Which business structure is MOST suitable?
Understand the Problem
The question is asking which business structure would be most appropriate for a group of investors looking to limit personal liability and divide profits. This implies an understanding of the characteristics and implications of different business structures.
Answer
Limited Liability Company (LLC)
A Limited Liability Company (LLC) is most suitable for investors who want to limit personal liability while dividing profits.
Answer for screen readers
A Limited Liability Company (LLC) is most suitable for investors who want to limit personal liability while dividing profits.
More Information
An LLC combines the limited liability protection of a corporation with the tax efficiencies and operational flexibility of a partnership. This makes it especially attractive for investors who want protection against personal financial loss.
Tips
A common mistake is assuming an LLC offers the same tax implications for every situation; the tax treatment can vary depending on the number of owners and other factors.
Sources
- Business Guide - Choose Business Structure - sba.gov
- Business Structure: How to Choose the Right One - NerdWallet - nerdwallet.com
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