Which organizational structure provides the benefit of liability protection along with tax benefits?

A Limited Liability Company (LLC) is designed to provide a combination of liability protection and tax benefits, making it an attractive choice for many business owners. One of the primary advantages of an LLC is that it protects the personal assets of its owners (known as members) from liabilities incurred by the business, which means that in most cases, members are not personally responsible for business debts and legal actions. This liability protection is comparable to that of a corporation.

In addition to liability protection, an LLC also offers significant tax advantages. By default, it is treated as a pass-through entity for tax purposes, meaning the business itself does not pay federal income taxes; instead, profits and losses are passed through to the members and reported on their personal tax returns. This can lead to lower overall tax liabilities, depending on the situation of the individual members.

In contrast, a corporation provides liability protection but may be subject to double taxation, where both the corporation's profits and the dividends paid to shareholders are taxed. A sole proprietorship and a general partnership, on the other hand, do not offer the same level of liability protection since the owners are personally liable for all business debts and obligations. Thus, in choosing an appropriate organizational structure, the LLC stands out as it