Question

Greta is concerned about the level of debt her business has incurred, as she is responsible for its liabilities. Assuming Greta is the sole owner, how could she organize her business to protect herself from the liabilities of the entity? (Check all that apply.)

Answer 1

Answer:

The correct answer is letter "B" and "C": Limited Liability Company; Corporation.

Explanation:

Limited Liability Companies or LLCs are businesses where the owners do not share liabilities for the operations of the business. The same situation occurs with corporations. The legal entity is separate from its owners implying their personal assets are not considered for repayment in front of the debt of the company.  

Single-member companies or Sole Proprietorships are entities where the owner is fully liable for the operations of the business. Therefore, if Greta would like to organize her business in a way she protects herself from liabilities, she should set her company as a Limited Liability Company or a Corporation.

Answer 2

Answer:

She can protect herself by making the business a Single member Limited Liability Company.

Explanation:

When a business is registered as a Limited Liability Company, the business owner cannot be held liable for the debts incurred by the company. The extent of the owner's liability will only be to what he or she has invested in the business.

This means the personal properties of the business owner will not be affected by the Company's debts.

Greta should therefore register her business as a Limited Liability Company to protect herself from the liabilities of the business.