In the scenario where Sophia and Mia are considering starting a business in a very risky industry, the wisest choice of business structure would likely be a limited partnership.
Here's why:
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Limited Liability: In a limited partnership, at least one partner (the general partner) has unlimited liability, while limited partners have liability limited to their investment in the business. This protects the personal assets of the limited partners (Sophia and Mia, in this case) from the business's debts and obligations.
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Risk Management: Given the high risk of the industry, having limited partners would allow Sophia and Mia to invest in the business without risking their personal financial security.
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Investment Flexibility: If they wish to bring in additional investors later, a limited partnership can accommodate that.
While a corporation also offers limited liability, it comes with more administrative requirements and costs. A general partnership exposes both partners to personal liability for the business's debts, and a sole proprietorship would not provide any liability protection at all.
Therefore, choosing a limited partnership would be the most prudent option in this scenario.