| |
Sole
Proprietor
|
General
Partnership
|
Limited
Liability Company
|
S
Corporation
|
C
Corporation
|
Liability
Protection
|
None. Owner/proprietor has unlimited liability. |
None.
Partners have unlimited liability. |
Yes.
Owners/Members generally not personally liable for the debts of the business. |
Yes
Owners/Shareholders are not personally liable for the debts of the corporation. |
Yes.
Owners/Shareholders are not personally liable for the debts of the corporation. |
Management
|
Owner/proprietor is responsible. |
Generally partners have an equal share of
responsibility. |
Owners/Members can manage or elect to have designated
managers. |
The corporation is managed by the board of directors
who are elected by the shareholders. |
The corporation is managed by the board of directors
who are elected by the shareholders. |
Formation
& Operation
|
Few legal requirements |
Few legal requirements. |
Some legal requirements, however, less formal
than corporations. |
Must maintain corporate formalities such as board of
directors and shareholder meetings/resolutions, annual meetings and annual reporting
requirements. |
Must maintain corporate formalities such as board of
directors and shareholder meetings/resolutions, annual meetings and annual reporting
requirements. |
Duration
|
Life of sole proprietor. |
Dissolved by death of partner. |
Generally limited to a fixed amount of time, however,
more states now allow perpetual existence. |
Perpetual |
Perpetual |
Taxation
|
Not a separate taxable entity. Sole proprietor pays all
taxes. |
Partners pay tax on their share of the income and can
deduct losses against other sources of income. |
Generally there is no tax at the LLC level.
Income/loss is passed through to members of the LLC according to the Operating
Agreement. LLC's can elect to be taxed as a C Corporation. |
No tax at corporate level. Income/loss is passed
through to the shareholders according to their percentage of ownership. |
Corporation must pay tax on all income and is subject
to certain restrictions on retained earnings. Shareholders then pay income tax on the
income distributed to them resulting in "double taxation". |
Pass Through Taxation
|
Yes |
Yes |
Yes |
Yes |
No |
Double
Taxation
|
No |
No |
No, however, LLC's can elect to be taxed as a C
Corporation. |
No |
Yes |
Transferability
of Ownership
|
No |
No |
Generally yes, subject to approval from other members. |
Yes, subject to consent and restrictions on
Shareholders. |
Yes. Generally there are no restrictions on transfers. |