What is one characteristic of a limited liability company (LLC)?

A limited liability company (LLC) is designed to provide its owners, known as members, with limited liability features. This means that the personal assets of the members are generally protected from the liabilities and debts of the LLC. In the event that the business encounters financial problems or legal issues, the members’ personal finances, such as their homes or personal bank accounts, are usually not at risk to satisfy business obligations. This characteristic is one of the key reasons why many entrepreneurs choose to form an LLC, as it combines the limited liability protections found in corporations with the operational flexibility and tax benefits often associated with partnerships and sole proprietorships.

In contrast, the other options describe misconceptions about LLCs. An LLC can have multiple members, not just a single owner, allowing for a variety of ownership structures. Members are not required to manage the company; they can choose to appoint managers, making it flexible regarding management structure. Additionally, LLCs are typically taxed as pass-through entities by default, meaning profits and losses are reported on the members' personal tax returns, rather than being taxed at the entity level like a corporation. This further distinguishes LLCs from traditional corporations in terms of tax treatment and operational flexibility.