D is corrent. The requirement is to determine an advantage of forming a limited liability company (LLC) as opposed to a partnership. An LLC is generally treated as a partnership for federal income tax purposes. However, an LLC provides limited liability for each and every owner even though they participate in management. In contrast, a partner who participates in the management of a partnership would be considered a general partner and would have unlimited liability. Creditors can reach the personal assets of a general partner to satisfy partnership debts, including a malpractice judgment against the partnership even though the partner was not personally involved in the malpractice.
A is incorrect. Both may make disproportionate allocations and distributions.
B is incorrect. Both may have any number of owners.
C is incorrect. Both can avoid entity level taxation.
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