Question

What is a similarity between limited liability companies (LLCs) and corporations in terms of formation?

a) Both are taxed as pass-through entities.
b) Both have unlimited liability for their owners.
c) Both require a board of directors.
d) Both have perpetual existence.

Answer 1

LLCs and corporations both provide limited liability protection to their owners, which shields their personal assets from the liabilities and debts of the business.

Step-by-step explanation:

The similarity between Limited Liability Companies (LLCs) and corporations in terms of formation is their provision of limited liability protection to their owners. Both business structures are designed to protect the personal assets of the owners or shareholders from the liabilities and debts of the business. Neither structure requires the owners to have an unlimited liability for the debts of the business, which is a stark contrast to other business forms like sole proprietorships or general partnerships. However, it's important to clarify that neither LLCs nor corporations inherently have perpetual existence. While corporations typically have perpetual existence unless stipulated otherwise, LLCs may or may not have this feature based on state laws and the terms of the LLC operating agreement.