Which of the following business entities generally provides all of its owners with limited liability while allowing them to participate in management without risking that liability?

Answer options:

General Partnership

Limited Partnership

Sole Proprietorship

Limited Liability Company (LLC)

How to approach this question

Evaluate liability and management rights for each entity.

Full Answer

D.Limited Liability Company (LLC)✓ Correct

An LLC provides limited liability to all its members (owners) and allows all members to participate in management (unless manager-managed is elected) without forfeiting their liability protection. A Limited Partnership requires at least one General Partner with unlimited liability.

Common mistakes

Selecting Limited Partnership (Limited partners lose protection if they participate in management in some jurisdictions, and there must be a GP with unlimited liability).

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