Question

4. Forms of business organizations Aa Aa Businesses can be classified into the following forms: sole proprietorship, partnership, corporation, limited liability company (LLC), and limited liability partnership (LLP) Different forms of businesses have different characteristics. Which of the following characteristics would apply to a limited liability company and a limited liability partnership? Check all that apply. LLPs are not suitable for professional firms such as accounting, law, and architecture Owned by single individual Owners have limited liability and right to vote Have corporate ownership structure Taxed as a partnership Limited financial liability You come across different kinds of businesses every day. The following table describes some businesses. Using the description of each business, classify it as a sole proprietorship, a partnership, a corporation, or a limited liability company/limited liability partnership. Business Scenario Type of Business LLC/LLP Selena and Mario run a law firm in Chicago. The firm has debt of $100,000, but Selena and Mario will not be held personally liable for the law firm's debt. Chris, the CEo of a beverage company, Is required to certity the accuracy of information provided in the company's quarterly reports Brandon started a business, based in a different state, with his uncle. Due to the business's underperformance, they had to close the business. Brandon, however, ended up losing his house due to a litigation claim. Richard founded and operated a wedding planning agency, which specialized in celebrity weddings. When he died, his business was dissolved because there was no plan for control after his death. Sole Proprietorship Corporation Partnership LLC/LLP Corporation

Answer 1

In a limited liability partnership/limited liability company, the liability of owners/stockholders/partners is limited i.e. they are not held personally liable for the losses caused to the firm/company.

Characteristics that apply are:

Owners have limited liability and right to vote

Have corporate ownership structure

Limited financial Liability

Selena and Mario not personally held for the firm’s debt = LLC/LLP

CEO is required to certify information = Corporation, CEO is required to certify in case of corporation

Brandon lost house due to a litigation claim = Partnership, liability of partners is unlimited

When Richard died, the business was dissolved = Sole Proprietorship, owned by a single person; dissolved when he died.