What is a limited liability company (LLC)?

A limited liability company (LLC) is indeed a business structure that combines aspects of both corporations and partnerships, providing significant benefits to its owners, known as members. One of the primary advantages of an LLC is that it offers liability protection similar to that of a corporation, which means that the personal assets of the members are generally protected from business debts and claims. This protection allows owners to engage in business activities without risking personal financial loss due to business liabilities.

Additionally, LLCs enjoy favorable tax treatment similar to partnerships, which allows income to pass through directly to the members. This means that the LLC itself does not pay federal income taxes; instead, income is reported on the members' personal tax returns, avoiding the double taxation often associated with corporations.

In contrast, the other choices do not accurately describe an LLC. The first option relates to a geographical limitation rather than the structural benefits of an LLC. The third option describes a nonprofit organization, which operates under different regulations and characteristics. The last option refers to a cooperative, which is a distinct business entity focused on benefiting its members rather than providing the liability protection and tax benefits that an LLC offers.