What is the difference among ownership structures (sole proprietorship, partnership, LLC, corporation) in CRE for liability and tax purposes?

• A. Sole proprietorship offers unlimited liability but pass-through taxation.
• B. Partnership offers limited liability with corporate taxation.
• C. LLC offers double taxation but liability protection.
• D. LLC commonly used for pass-through taxation and liability protection; corporation offers limited liability but may have double taxation; partnerships pass through.

Answer: (D)

In CRE the main point is that liability protection and tax treatment vary by ownership form, shaping how investors shield assets and report income. An LLC provides a shield between personal assets and property liabilities, and its default tax treatment is pass-through—profits and losses flow to members’ personal returns rather than being taxed at the entity level (though an LLC can elect corporate taxation if that’s advantageous). Corporations also offer liability protection, but they can face double taxation: profits taxed at the corporate level and again when distributed as dividends. Partnerships generally pass income through to the partners, avoiding entity-level tax, though liability exposure depends on the partnership type (general vs. limited). This combination—LLCs for liability protection with pass-through taxation, corporations with potential double taxation but strong liability shields, and partnerships that pass through—best captures the typical differences in CRE.