Question

They realize that their plan is risky, so they also want to limit their personal liability in case events don't go as planned. Which business organization would best meet their needs?

Answer 1

To limit personal liability in business, a student should consider forming a Limited Liability Partnership (LLP) or a corporation, which provide liability protection and prevent owners from risking their personal assets.

Step-by-step explanation:

If a student wants to limit personal liability while still taking risks in their business endeavor, they should consider forming either a Limited Liability Partnership (LLP) or a corporation. An LLP can shield the owners' personal assets, as they are only at risk for the amount invested into the business. Similarly, a corporation is a separate legal entity where shareholder liability is also limited to their investment, meaning that they cannot lose more than they have put into the business.

Unlike a sole proprietorship or a general partnership, where owners may be personally liable for business debts and lawsuits, both an LLP and a corporation offer protection. A corporation might be more favorable when it comes to raising funds, as it can issue stock and tends to have additional structures that can attract investors.