An athletic equipment shop and a sole proprietorship

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Reference no: EM131720911

1. Zoe operates Wood Rail Center Sports, an athletic equipment shop, as a sole proprietorship. She is concerned about her tax liability, and wondering whether to continue as a sole proprietorship or to reorganize under another business structure. Which of the following would be the best advice for Zoe?

A. Zoe should remain a sole proprietorship; she would have the same tax liability if she reorganizes as a LLC.

B. Zoe should remain a sole proprietorship; there are no business taxes on sole proprietorships.

C. Zoe should consider reorganizing as a LLC to reduce her tax liability.

D. Zoe should consider reorganizing as a corporation to avoid personal tax liability on business income.

2. In December 2016, Charlotte became the 25th partner with International Enterprises, an existing general partnership with 24 partners. In April 2017, an International Enterprises partnership debt came due in full in the amount of $100,000. The debt was originally incurred in June 2016. Charlotte is:

A. Only liable for the debt up to the amount of her capital contribution to the partnership.

B. Not liable for the debt because the debt was incurred prior to her joining the partnership.

C. Liable for her pro-rata one-twenty fifth share of the total debt along with the other partners.

D. Liable for one-twenty fifth of the debt if all the other partners default on the debt ad refuse to pay.

Reference no: EM131720911

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