Multiple Choice
Portia owns and manages a sporting apparel company by herself. Which type of business organization does this most likely represent?
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1. Introduction to Accounting
Business Organization
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You are the manager of a retail store and are considering different forms of business organization. Which of the following forms would provide you with limited liability protection?
A
Partnership
B
Sole proprietorship
C
General partnership
D
Corporation
Verified step by step guidance1
Understand the concept of limited liability protection: Limited liability means that the owners of a business are not personally responsible for the debts and liabilities of the business. Their personal assets are protected, and only the assets invested in the business are at risk.
Review the characteristics of each business form: Sole proprietorship and general partnership do not provide limited liability protection. In these forms, the owners are personally liable for the debts and obligations of the business.
Analyze the corporation structure: A corporation is a separate legal entity from its owners (shareholders). It provides limited liability protection, meaning the shareholders are not personally liable for the corporation's debts or liabilities.
Compare the corporation to other forms: Unlike partnerships and sole proprietorships, a corporation shields its owners from personal liability, making it the preferred choice for those seeking limited liability protection.
Conclude that the correct answer is 'Corporation' based on its ability to provide limited liability protection to its owners.
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