ExpertHard1 markMultiple Choice
CPA · Question 13 · Area II: Business Law
Which of the following business entities generally provides all of its owners with limited liability while allowing them to participate in management without risking that liability?
Which of the following business entities generally provides all of its owners with limited liability while allowing them to participate in management without risking that liability?
Answer options:
A.
General Partnership
B.
Limited Partnership
C.
Sole Proprietorship
D.
Limited Liability Company (LLC)
How to approach this question
Evaluate liability and management rights for each entity.
Full Answer
D.Limited Liability Company (LLC)✓ Correct
D
An LLC provides limited liability to all its members (owners) and allows all members to participate in management (unless manager-managed is elected) without forfeiting their liability protection. A Limited Partnership requires at least one General Partner with unlimited liability.
Common mistakes
Selecting Limited Partnership (Limited partners lose protection if they participate in management in some jurisdictions, and there must be a GP with unlimited liability).
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