Which structure combines partnership tax benefits with corporate limited liability?

• A. Sole Proprietorship
• B. Partnership
• C. Corporation
• D. LLC

Answer: (D)

Combining pass-through taxation with limited liability protection.

An LLC lets profits and losses pass through to members for tax purposes, so earnings are taxed at the members’ personal rates rather than at the corporate level. At the same time, it provides limited liability, meaning members aren’t personally on the hook for the business’s debts or lawsuits. This hybrid structure also offers flexibility: by default, a multi-member LLC is taxed like a partnership, but owners can elect to have it taxed as a corporation if that benefits them.

Other structures don’t pair both features. A sole proprietorship has no liability protection. A general partnership also lacks liability protection for owners. A corporation provides liability protection but can face double taxation on profits unless special tax status is chosen. The LLC uniquely offers both limited liability and pass-through taxation.