Which form is commonly described as a hybrid with limited liability and pass-through taxation?

• A. C corporation
• B. S corporation
• C. Franchise
• D. LLC

Answer: (D)

This item tests understanding of a business entity that offers limited liability while typically allowing profits and losses to pass through to owners for tax purposes. The form described as a hybrid with limited liability and pass-through taxation is the LLC. An LLC protects members’ personal assets from business debts and lawsuits, like a corporation, but it normally lets profits and losses be reported on members’ personal tax returns, avoiding the double layer of corporate tax. You can choose how it’s taxed—by default as a partnership or sole proprietorship, or elect to be treated as a corporation—giving flexibility. Other options either involve taxation at the corporate level (not pass-through) or are not a business entity (a franchise is a licensing model).