Question

Ron, Sandy and Tom want to enter into business together with the least amount of paperwork. It is very important to them to pay the least possible amount of federal and state taxes and to get the business off the ground in the shortest possible amount of time. None of them have any significant amount of personal assets, so they want to do it as cheaply as possible and they are not worried about personal liability. Based on these facts, they should organize their business as a: A. sole proprietorship B. general partnership C. limited partnership D. limited liability company E. corporation

Answer 1

Answer:

The answer is: B) general partnership

Explanation:

The advantages of a general partnership are:

• Each partner files the profits or losses of the business on his or her own personal income tax return.
• This way the business does not get taxed separately.
• Easy to establish.

Some of the disadvantages are:

• Partners share unlimited personal liability with respect to debts, obligations, contracts, torts, potential lawsuits, etc. (Ron, Sandy and Tom are not worried about this.)
• A partner cannot transfer interest in the partnership without the unanimous consent of the partners.