If you want some benefits enjoyed by large corporations but avoid double taxation and protect from liabilities, which structure fits you with four partners who won't sell shares publicly?

• A. Limited Liability Company
• B. S-Corporation
• C. C-Corporation
• D. Sole Proprietorship

Answer: (B)

The structure you’re looking for combines the liability protection of a corporation with the tax treatment of a pass-through entity, while staying privately held. An S-Corporation does just that: it is a corporate form, so owners have limited personal liability for business debts, yet profits and losses pass through to the owners’ personal tax returns, avoiding the double taxation that a C-Corporation faces.

With four private partners who don’t plan to sell shares publicly, an S-Corp fits because it allows ownership by individuals without going public, and it keeps a small, manageable shareholder base (well within the 100-shareholder limit and with restrictions on the type of stock). This gives you a formal corporate structure and protection, plus tax efficiency.

A C-Corporation would still face corporate-level tax and then tax again when profits are distributed, which is the double taxation you want to avoid. A Sole Proprietorship can’t accommodate multiple partners and offers no liability protection. An LLC does provide liability protection and pass-through taxation, but the scenario here emphasizes a corporate form with stock ownership by private partners, which aligns best with an S-Corporation.