D is corrent. The requirement is to identify the form of business that provides all owners with limited liability while avoiding federal taxation of income at the entity level. A Subchapter S corporation provides for limited liability of the shareholders and the corporation is not required to pay taxes at the entity level.
A is incorrect because regular partnerships do not afford limited liability to partners.
B is incorrect because Subchapter C corporations pay federal income tax.
C is incorrect because the general partners of a limited partnership do not have limited liability.
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