Which statement correctly describes a limited liability company (LLC)?

• A. It provides limited liability to owners and passes income to owners for taxation.
• B. It is taxed as a separate corporate entity by default and cannot pass income to owners.
• C. It requires at least 100 shareholders.
• D. It cannot raise capital from investors.

Answer: (A)

Limited liability plus pass-through taxation characterize an LLC. The owners gain protection from personal liability for business debts, while the business’s profits and losses pass through to the owners’ personal tax returns, avoiding corporate-level tax. By default, the IRS treats an LLC as a pass-through entity rather than a separate corporate entity, though it can elect to be taxed as a corporation if desired. The other statements don’t fit because there is no 100-shareholder requirement for LLCs, and LLCs can raise capital by bringing in investors or members.