Tennessee Business and Law Practice Exam

A significant advantage of a limited liability company (LLC) is its flexible management structure. This flexibility allows members to decide how they want to manage the company, which can be beneficial depending on the specific needs and goals of the business. Unlike corporations that have a fixed structure with directors and officers, an LLC can be member-managed or manager-managed, giving the owners the ability to choose the management style that best fits their operational preferences.

This adaptability can help in accommodating various ownership and management styles, whether the members prefer taking an active role in daily operations or want to appoint a manager to handle those responsibilities. Additionally, the flexibility extends to financial arrangements and profit sharing, allowing members to determine how profits and losses are distributed among themselves.

In contrast, double taxation represents a disadvantage typically associated with corporations rather than LLCs, as an LLC generally enjoys pass-through taxation where profits are only taxed once at the member level. Personal liability is also the opposite of an advantage for LLCs, as one of their primary benefits is providing limited liability protection to its members, shielding them from personal responsibility for the company's debts and obligations. Thus, flexible management structure is the clear and significant advantage of LLCs in this context.