NCIDQ Interior Design Professional Exam (IDPX) Practice Exam

For a designer and husband starting a business, which structure limits personal liability and is easy to establish?

1. Partnership

2. C corporation

3. Sole proprietorship

4. LLC or LLP

The correct answer is: LLC or LLP

Choosing an LLC (Limited Liability Company) or LLP (Limited Liability Partnership) as a business structure is advantageous for a designer and spouse starting a business primarily due to the limited personal liability it offers. This means that, as owners, their personal assets are generally protected from any debts or lawsuits incurred by the business, mitigating financial risk associated with entrepreneurial ventures. Establishing an LLC or LLP is relatively straightforward compared to other structures, like a C corporation, which often involves more regulatory requirements, such as a formal board of directors, annual meetings, and extensive record-keeping. While a sole proprietorship has the benefit of being incredibly easy to establish, it does not provide any liability protection, leaving personal assets vulnerable. Similarly, partnerships can expose personal assets to liability for business debts and any wrongdoings of partners. Therefore, an LLC or LLP strikes a balance between ease of formation and the essential protection of personal assets, making it an excellent choice for individuals embarking on a business together.