Which of the following statements about limited liability companies (LLCs) and limited liability partnerships (LLPs) is accurate?

Limited liability companies (LLCs) and limited liability partnerships (LLPs) are both typically taxed as partnerships by default. This means that the income of these entities passes through to the individual members or partners, who then report it on their personal tax returns. This pass-through taxation avoids the double taxation that can occur with corporations, where income is taxed at the company level and again at the individual level when distributed as dividends to shareholders.

Both LLCs and LLPs offer the advantage of limited liability protection to their owners, shielding personal assets from business debts and claims. However, they do not change the fundamental taxation method that applies to partnerships, making the designation as being taxed as partnerships accurate.