Question

Friedo and Miriam meet at a start-your-own business workshop. They would both like to open a bookstore. While they have start-up capital, they are worried about the risk to their personal property. Which of the following would most likely be the best business choice for each of them?A. Sole proprietorshipB. PartnershipC. Limited liability companyD. Corporation

Answer 1

Answer:

C. Limited Liability Company

Explanation:

Limited liability company has this characteristic where as the name suggests the liability is limited to the value of contribution made in the firm. The personal property of any partner cannot be attached to any person, in order to save the partners from being personally liable to firm's creditors.

This provision is not present in general partnership form, as the liability is not limited up to the amount of contribution, rather the partners are personally held liable for any creditors in case the partnership firm fails.

Corporation is for huge number of partners and even expensive to form than the limited liability partnership.

Sole proprietorship offers an individual only to run the business, there are no partners allowed.

Thus, Friedo and Miriam shall form a limited liability partnership.