An Important Fact to Consider When Determining How to Organize

question 84

Multiple Choice

An important fact to consider when determining how to organize a business is that:

• A) members of an LLC have unlimited liability and are taxed like members of a partnership.
• B) for accounting purposes, a proprietorship is a distinct entity.
• C) the records of a partnership can include the partner's personal finances.
• D) the proprietor and the proprietorship are separate legal entities.

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Definitions:

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including material and labor costs.

Ending Inventory

The value of goods available for sale at the end of an accounting period, calculated before the next period's inventory is added.

Net Income

The net income of a company once all costs and taxes are subtracted from its revenues.

Overstatement

The exaggeration of income, assets, or worth in financial reporting.