A business structure that is created and taxed like a partnership but has limited liability like a corporation is known as what?

• A. Limited Liability Company
• B. Corporation
• C. Partnership
• D. Sole Proprietorship

Answer: (A)

A limited liability company combines the liability protection of a corporation with the tax simplicity of a partnership. It shields owners’ personal assets from business debts and lawsuits, while usually using pass-through taxation, so profits and losses flow to members’ personal tax returns rather than being taxed at the entity level. This avoids the double taxation of a regular corporation, unless the LLC elects to be taxed as a corporation. For a farm business, this means liability protection with flexible, often simpler, tax treatment.