Question

The following are some business scenarios. Using the description of each business, classify it as a sole proprietorship, a partnership, a corporation, or a limited liability company/limited liability partnership.

1. Jacob 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.
2. Wilson started a business, based in a different state, with his uncle. Due to the business’s underperformance, they had to close the business. Wilson, however, ended up losing his house due to a litigation claim.
3. DDX Co. is a shipping company. David owned 1,000 shares of DDX stock. He found better opportunities and sold his entire stake in DDX to another investor. 4. Selena and Mario run a law firm in Chicago. The firm has a debt of $100,000, but Selena and Mario will not be held personally liable for the law firm’s debt.

Answer 1

Answer:

The correct answer for 1 is Proprietorship, 2 is partnership, 3 is corporation and 4 is LLC/LLP.

Explanation:

The following type of business can be defined as:

• Proprietorship: This type of business owned by a single person and he has unlimited liability for it.

• Partnership: This type of business owned by two or more peoples and all partners has unlimited liability for it.

• Corporation: This type of business owned by a group of peoples, known as the board of directors and there are many shareholders in the company.

• LLC/LLP: This type of business can be owned by a minimum of two directors who have limited or no personal liability for the company.

Accordingly, the answer is as follows :

1. As Jacob is the only owner of the business and the business dissolved when he dies shows the proprietorship type of business.  

2. Wilson and his uncle are the owners of business and Wilson have to pay liability by losing his home shows the partnership type of business.

3. As David is a shareholder in DDX Co. it shows the Corporation type of business.

4. As Selena and Mario are two owners of the company and they are not liable for the debt of the company shows the LLC/LLP type of business.