What is a limited liability company (LLC)?

A limited liability company (LLC) is indeed a business structure that effectively combines liability protection with tax benefits. This means that owners (referred to as members) are typically shielded from personal responsibility for the debts and liabilities of the LLC, much like shareholders in a corporation. This protection is advantageous because it helps preserve the personal assets of the members in the event that the LLC faces lawsuits or financial difficulties.

Additionally, LLCs benefit from pass-through taxation, meaning that the profits and losses can be reported on the members' personal tax returns rather than being taxed at the corporate level. This can lead to potential tax savings, making LLCs a popular choice among small business owners and entrepreneurs.

Understanding this combination of liability protection and tax advantages is essential for individuals considering the formation of a business entity, which is why option B accurately describes an LLC.