Multiple Choice
A ____ is considered a blueprint for a company.
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1. Introduction to Accounting
Business Organization
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Which of the following organizational forms provides its owners with limited liability?
A
Sole proprietorship
B
General partnership
C
Unlimited liability company
D
Corporation
Verified step by step guidance1
Understand the concept of limited liability: Limited liability means that the owners of a business are not personally responsible for the debts and obligations of the business beyond their investment in the company.
Review the characteristics of each organizational form: Sole proprietorship and general partnership do not provide limited liability, as the owners are personally liable for the debts of the business. Unlimited liability company, by definition, does not offer limited liability.
Focus on the corporation: A corporation is a separate legal entity from its owners (shareholders). This structure provides limited liability, meaning shareholders are only liable up to the amount they invested in the corporation.
Compare the organizational forms: Sole proprietorship and general partnership expose owners to personal liability, while a corporation shields its owners from personal liability for business debts.
Conclude that the correct answer is 'Corporation,' as it is the organizational form that provides its owners with limited liability.
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