Question

what are advantages of a limited liability company? mark all correct answers a. income may be taxed only once b. personal asset protection of the owners c. no paperwork is required d. partners share unlimited liability

Explanation:

• Option a: Limited Liability Companies (LLCs) often enjoy pass - through taxation. This means the company's income is not taxed at the entity level. Instead, the income "passes through" to the owners (members), who report it on their personal tax returns. So, income is taxed only once (at the individual level), unlike a C - corporation where income is taxed at the corporate level and then again when distributed as dividends (double - taxation).
• Option b: One of the key features of an LLC is limited liability. The owners' (members') personal assets are generally protected from the company's debts and liabilities. If the LLC faces financial difficulties or legal claims, creditors usually cannot go after the members' personal homes, savings, etc., beyond their investment in the LLC.
• Option c: This is incorrect. Forming an LLC requires paperwork such as filing articles of organization with the state. There are also ongoing requirements like maintaining records, which involve paperwork.
• Option d: This is incorrect. In an LLC, partners (members) have limited liability. It is in a general partnership that partners share unlimited liability.

Answer:

a. Income may be taxed only once, b. Personal asset protection of the owners