Which of the following, if true about the owners’ plan for the new bus

QUESTION

Which of the following, if true about the owners’ plan for the new business, strengthens the case that it should be registered as a limited liability corporation (LLC)?

A) They want the company to be able to issue stock and offer stock benefits to employees.
B) They want to form the company quickly and inexpensively.
C) They don’t want owners to have to pay personal taxes on company profits.
D) They want the company’s profits to be distributed however they choose.
E) They want to operate consistently in multiple states.

ANSWER

Answer: D
Explanation: D) Unlike an S corporation, which must allocate its profits in proportion to a shareholder’s interest, an LLC’s profits can be distributed however the owners choose. Choice A: An LLC has ownership interests but cannot issue stock. Choice B: Paperwork requirements for starting up an LLC can be noteworthy as both state and federal bureaucracies are involved. Choice C: Owners of an LLC do have to pay self-employment taxes on profits. Choice E: LLC’s may face inconsistent operating requirements, such as dissolution dates, in various states.