What is the main advantage of a limited liability company (LLC)?

• A. The members are not personally liable for the debts of the organization.
• B. Members are personally liable for the debts of the organization.
• C. It has no tax advantages.
• D. It cannot be used by corporations.

Answer: (A)

The main idea here is liability protection. An LLC is a separate legal entity from its owners, so the members’ personal assets—like their homes or savings—are generally protected if the business owes money or faces a lawsuit. Their risk is usually limited to the amount they invested in the LLC. This is the standout advantage because it contrasts with sole proprietorships or general partnerships, where owners’ personal assets can be at risk for business debts. Of course, there are exceptions—personal guarantees, fraud, or improperly mixing personal and business funds can pierce that protection—but in ordinary circumstances the LLC shields personal wealth.

It’s also helpful to note that LLCs often offer pass-through taxation, meaning profits pass to members’ tax returns without being taxed at the entity level, though they can elect corporate taxation if that’s beneficial. The other statements aren’t accurate: members aren’t personally liable for the LLC’s debts in the usual course, there can be tax advantages, and corporations can own or form LLCs.