Certified Apartment Portfolio Supervisor (CAPS) Practice Exam - Module 2

Which ownership type combines elements of corporations and provides personal liability protection?

1. Sole proprietorship

2. LLC

3. C Corp

4. Joint Venture

The correct answer is: LLC

The ownership type that combines elements of corporations while providing personal liability protection is the Limited Liability Company (LLC). An LLC is designed to give its owners, known as members, the benefits of both corporation and partnership structures. It offers the limited liability protection typically associated with corporations, meaning that the personal assets of the members are shielded from the debts and liabilities of the business. This protection is a standout feature, as it allows individuals to invest in or operate a business without risking their personal finances beyond their investment in the LLC. Furthermore, an LLC can choose how it wants to be taxed—whether as a sole proprietorship, a partnership, or a corporation—providing flexibility in financial operations. This adaptability is a significant advantage for many businesses. In contrast, sole proprietorships do not offer personal liability protection, meaning owners are fully responsible for all debts. C Corporations do provide liability protection as well but are subject to more rigid regulations and double taxation on profits. Joint ventures are typically formed for a specific project or temporary business purpose and do not inherently provide the same level of liability protection or structure as an LLC. Thus, the LLC stands out for its unique combination of features.