Florida Broker Practice Exam

Which form of business organization offers owners protection from personal liability for business debts while being taxed like a partnership?

1. Corporation sole

2. Joint venture

3. Limited Liability Companies

4. Business trust

The correct answer is: Limited Liability Companies

Limited Liability Companies (LLCs) offer a unique combination of features that are highly beneficial for business owners. An LLC provides its members with protection from personal liability for business debts, meaning that the personal assets of the owners are generally protected if the company faces financial difficulties or legal issues. This protection is a fundamental reason why many entrepreneurs choose to operate as LLCs. Additionally, LLCs are taxed similarly to partnerships, which allows the income of the business to be passed through to the owners' personal tax returns, avoiding double taxation that occurs in traditional corporations. This means that profits are only taxed once at the individual level rather than at both the corporate and individual levels, which can lead to higher overall tax burdens. This hybrid structure of limited liability and pass-through taxation makes LLCs an attractive choice for many business owners looking for flexibility and protection. Other business organizations, such as corporations or joint ventures, may not have the same combination of liability protection and favorable tax treatment.