Dori and Matt Will Be Equal Owners of a New

question 121

Multiple Choice

Dori and Matt will be equal owners of a new business and will be making cash contributions to start up the business.They expect substantial losses in the early years so the business will take out a loan from the bank which Dori and Matt will have to guarantee.For tax purposes,the preferred business form for these early years will be

• A)a C corporation.
• B)an S corporation.
• C)an LLC,taxed as a partnership.
• D)either an S corporation or an LLC (partnership).The owners will be indifferent between these two forms.

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Definitions:

Partner

A member of a business or firm who shares its risks and profits or an individual who takes part with another or others in a relationship or activity.

Exchange Relationship

A social interaction based on reciprocal actions where the benefits given and received are considered.

Equity Norm

A principle based on fairness, where rewards and resources are distributed based on the contributions of individuals.

Individual Rights

Fundamental rights entitled to each person that protect freedoms and ensure fair treatment.