Which business structure provides limited liability with pass-through taxation?

• A. LLC — limited liability with pass-through taxation.
• B. Sole Proprietorship — unlimited personal liability.
• C. Corporation — no liability protection.
• D. Partnership — unlimited liability.

Answer: (A)

Limited liability with pass-through taxation describes a structure that protects owners’ personal assets while letting profits be taxed only at the owners’ level. An LLC provides this blend: members enjoy limited liability, meaning personal assets aren’t at risk for business debts or lawsuits, and the business’s profits or losses pass through to members’ personal tax returns, avoiding paying corporate taxes at the entity level. This hybrid is what makes an LLC attractive, combining liability protection with tax simplicity. Other structures either expose owners to personal liability (like sole proprietorships and general partnerships) or typically tax profits at the entity level (traditional C corporations), though some corporations can elect pass-through treatment, which changes the tax dynamics.