Why Is Understanding What Type of Legal Entity a Business

Multiple Choice

Why is understanding what type of legal entity a business uses important when initially setting up an accounting system?

A) Legal entity dictates what types of reports a business must use to make informed beneficial internal decisions; therefore,the accounting systems is set up to support the need to make the most beneficial internal decisions.
B) Legal entity has very little impact on what tax form a business uses,therefore,it is really not of great importance when setting up an accounting system.
C) A company's type of legal entity impacts the equity accounts and the tax form a business files.The tax form a business files greatly impacts the type of financial information an accounting system must track.
D) A company's type of legal entity is relatively fluid and changes often.An accounting system must be able to respond to these changes from year to year.