This month’s study question from the Solomon Online Exam Simulator question database is now available.
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A popular type of business structure that does not limit an owner’s personal liability for the actions and/or debts of the entity and does not have to pay corporate taxes on profits is a:
B. C corporation
C. S corporation
D. Sole proprietorship
Correct Answer: D. Sole proprietorship
Rationale: LLCs, S Corporations and C Corporations all offer some form of limited liability to their owners. LLCs and S Corporations are so-called “pass through“ entities and do not pay taxes on profits at the entity level (as opposed to C Corporations which do). The correct answer to this question is a sole proprietorship. A sole proprietorship does not offer an owner any liability protection and is not required to file corporate income tax returns.
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