Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

What type of corporation does not provide personal liability protection for its owners?

1. S Corporation

2. Partnership

3. Limited Liability Corporation

4. C Corporation

The correct answer is: Partnership

In a partnership, the owners, known as partners, have personal liability for the debts and obligations of the business. This means that if the partnership incurs any debts or is sued, the partners might be held personally responsible for paying those debts, which can affect their personal assets. On the other hand, S Corporations, Limited Liability Companies (LLCs), and C Corporations are entities that typically provide limited liability protection. This means that the owners, or shareholders, are generally not personally liable for the debts and liabilities of the corporation. Their risk is limited to their investment in the business, protecting personal assets from business creditors. Understanding these distinctions is crucial for anyone involved in real estate or business formation. It emphasizes the importance of choosing the appropriate business structure based on the level of liability one is willing to take on and the degree of personal asset protection desired.