Question
Cody has been operating his own after-school childcare facility for three years. He originally registered as a sole proprietor when he operated out of his home but has grown so much that he now offers services at a local community center. Why might he want to change to an LLC at this point in his career?
An LLC will protect the him from legal or financial trouble.
An LLC will require him to pay less in taxes.
An LLC is the most lucrative type of legal business structure.
An LLC generally requires no formal action to establish.
An LLC will protect the him from legal or financial trouble.
An LLC will require him to pay less in taxes.
An LLC is the most lucrative type of legal business structure.
An LLC generally requires no formal action to establish.
Answers
GPT-4o mini
Cody may want to change to an LLC (Limited Liability Company) at this point in his career primarily because:
**An LLC will protect him from legal or financial trouble.**
By forming an LLC, Cody can separate his personal assets from the business liabilities. This means that if the business faces legal issues or incurs debt, his personal belongings (such as his home or personal savings) will typically be protected, limiting his liability to the assets of the business itself.
The other options have some inaccuracies:
- An LLC does not necessarily require him to pay less in taxes; tax benefits depend on the specific situation and structure.
- While LLCs can offer tax flexibility, they are not universally the most lucrative type of legal business structure.
- An LLC typically does require formal action to establish, including filing paperwork with the state.
Therefore, the primary reason for Cody to consider switching to an LLC would be the enhanced protection against legal and financial risks.
**An LLC will protect him from legal or financial trouble.**
By forming an LLC, Cody can separate his personal assets from the business liabilities. This means that if the business faces legal issues or incurs debt, his personal belongings (such as his home or personal savings) will typically be protected, limiting his liability to the assets of the business itself.
The other options have some inaccuracies:
- An LLC does not necessarily require him to pay less in taxes; tax benefits depend on the specific situation and structure.
- While LLCs can offer tax flexibility, they are not universally the most lucrative type of legal business structure.
- An LLC typically does require formal action to establish, including filing paperwork with the state.
Therefore, the primary reason for Cody to consider switching to an LLC would be the enhanced protection against legal and financial risks.