Question

What type of legal entity do many entrepreneurs use and why?

Multiple Choice

Sole Proprietorships due to the ease of initially setting up an organization.

C Corporation due to its accounting system and financial reporting information.

C Corporation due to its ability to finance with both debt and stock.

LLC due to its tax advantages and the limited liability aspect to owners.

Answer 1

Answer :   LLC due to its tax advantages and the limited liability aspect to owners.

Explanation :

LLC have many advantages over other legal entities as

1. Tax Advantages - Owner have the option to file tax return as sole proprietorship if it is sole owner or as partnership if having partners. It have the advantage of single time tax as in C corporation income is taxed twice, first time as corporate tax second time in individual owner (for his share).

2. Limited Liability - In LLC, liability is limited to the money invested by individual in LLC. One is not liable to pay from its own savings and Home like sole proprietorship .