Which entity blends the limited liability of a corporation with the tax advantages of a partnership?

• A. Limited liability partnership
• B. Unincorporated association
• C. Limited liability company
• D. Partnership

Answer: (C)

The key idea is a business form that offers personal liability protection while letting profits pass through to owners for tax purposes. An LLC provides that mix: members have limited liability, so personal assets aren’t typically at risk for business debts, and by default the entity isn’t taxed itself. Instead, profits and losses go to the members and are reported on their personal tax returns, avoiding double taxation. This combination—liability protection plus pass-through taxation—makes the LLC the most fitting choice.

Limited liability partnerships do offer liability protection for partners in many professional services, and they’re generally taxed on a pass-through basis, but they’re not as universally applicable or flexible as an LLC. An unincorporated association isn’t a distinct entity with strong liability protection, and it lacks the clear, consistent tax treatment of an LLC. A general partnership has pass-through taxation but provides no liability protection to the partners. So the form that best blends these two features is the limited liability company.