Some Business Owners Prefer to Operate as a Limited Liability

question 113

Multiple Choice

Some business owners prefer to operate as a limited liability company (LLC) rather than an S-corporation for the following reason:

• A) unlike an S-corporations, a LLC's earnings are taxed at the personal level when paid out as dividends
• B) unlike an S-corporation, stockholders in a LLC are not personally liable for company debts
• C) the LLC form of organization does not have as many rules and regulations as does an S-corporation
• D) unlike an S-corporation, the LLC pays corporate taxes on its earnings

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Definitions:

Earnings Growth Rate

The annual rate of growth of a company's earnings per share, indicating the company's profitability trend over time.

Required Return

The minimum return an investor expects to achieve on an investment to compensate for its risk.

Dividend Growth Rate

The rate at which a company's dividend payments increase over time, often expressed as a percentage.

Dividends

Are the distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.