Final answer:
Lily and Ashok should organize their firm as a Limited Liability Company (LLC) to protect personal assets and benefit from limited liability, tax efficiencies, and flexibility in management.
Step-by-step explanation:
If Lily and Ashok wish to start a business selling a beauty product and would like to avoid losing personal assets, the most suitable form of business to organize would be a Limited Liability Company (LLC). Unlike a sole proprietorship or a partnership, where owners are personally responsible for all debts and obligations, an LLC provides protection against personal liability. An LLC is a hybrid structure that combines the liability protection of a corporation with the tax efficiencies and operational flexibility of a partnership. Since they are concerned about risk and protecting personal assets, a corporation could also be a consideration; however, it may involve more complexity and regulatory requirements than an LLC.
Considering their concerns and the nature of a new venture, incorporating as an LLC seems to be the most advantageous option for Lily and Ashok. An LLC can protect its personal assets while providing flexibility in management and fewer formalities than a corporation. This structure, while allowing profits to be taxed directly to the members, avoids the double taxation typically associated with corporations.