What is an LLC (Limited Liability Company)?

• A. A type of corporation that issues stock
• B. A flexible business structure combining features of corporations and partnerships
• C. A sole proprietorship with limited liability benefits
• D. A partnership that cannot have more than two members

Answer: (B)

A Limited Liability Company (LLC) is best described as a flexible business structure that combines features of both corporations and partnerships. This hybrid structure provides the limited liability protection typically associated with corporations while also allowing for the pass-through taxation benefits of partnerships.

In an LLC, owners (called members) are protected from personal liability for business debts and claims, which means their personal assets are generally kept separate from the business's obligations. This can be an appealing option for small business owners who want the protection of corporate liability without the complexities and formal requirements associated with a corporation.

This flexibility also allows LLCs to choose how they wish to be taxed; they can opt for pass-through taxation like a partnership or elect to be taxed as a corporation if it proves beneficial. This adaptability makes LLCs a popular choice for many entrepreneurs and small businesses.

The other options do not accurately reflect the nature of an LLC, which is why they are not suitable answers. A corporation is distinctly different as it issues stock and has a different structure and regulatory requirements. A sole proprietorship lacks the limited liability component entirely, making it fundamentally different from an LLC, while the description of a partnership with a member limit does not align with the LLC structure, which can have multiple members.