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Basic comparison of common business entities

Compare the major business entity types side by side in this handy chart. You can view key differences in entities including how capital is raised, deductible benefits, income taxes, basic legal formalities, and much more…

  Sole
Proprietorship
General
Partnership
Limited
Partnership
C Corporation S Corporation Limited Liability
Company (LLC)
Business
Owned By
Sole proprietor Partners Partners Shareholders Shareholders Members
Number
Of Owners
Only one One minimum 1 General &
1 Limited Partner minimum
1 to unlimited 1 to 100 1 to unlimited
Owners have personal liability
for business
obligations
Sole proprietor
is liable              
All partners
  are liable       
Only general partners are liable  No No No
Management
decisions
made by
Sole proprietor General partners Only the
general partners
Board of  Directors Board of  Directors Members unless
the LLC elects manager
management
Effect on business of an owners death
or departure
Terminates Terminates unless
Partnership Agreement states otherwise
Terminates unless
Partnership Agreement states otherwise
None None None unless LLC Agreement or State says otherwise
Transfer of
Ownership
Easy Consent of all partners usually required by Agreement Consent of all partners usually required by Agreement By stock transfer
(securities laws may limit)
By stock transfer
(securities laws may limit)
Most LLC Agreements require approval of members
Required paperwork and legal formalities Minimum Minimum Initial filing Initial filing – record meetings of directors & shareholders Initial filing – record meetings of directors & shareholders Initial filing
Raising
Capital
From the sole proprietor From the partners  From the partners Sale of stock & other permitted instruments Sale of stock & other permitted instruments From the members
Income
Taxes
Paid by sole proprietor Paid by partners unless elect corporate tax status Paid by partners unless elect corporate tax status Paid by the corporation Passed thru & paid by the shareholders Paid by members unless elect corporate tax status
Who Deducts
Losses
Sole proprietor can deduct from active business income Active partners can deduct from active business income Special rules apply – check with tax advisor Corporation Passed thru to the shareholders Special rules apply – check with tax advisor
Deductible Benefits for Working Owners Not usually but can deduct medical insurance & set up IRA or Keogh retirement plan Not usually but can deduct medical insurance  & set up IRA or Keogh retirement plan Not usually but can deduct medical insurance & set up IRA or Keogh retirement plan Many fringe benefits like stock option & bonus plans - medical & life insurance  Not usually but can deduct medical insurance  and set up IRA or Keogh retirement plan Not usually but can deduct medical insurance & set up IRA or Keogh retirement plan unless elect corporate tax status
Who Finds This
Entity Best for Them
Sole owner who  wants no red tape & is OK with personal liability Multiple owners who  want little red tape & are OK with personal liability Multiple owners with passive owners wanting limited liability & pass thru tax status without forming an LLC Owners who want limited liability and the ability to reduce overall taxes by splitting income taxes Owners who want limited liability and pass thru tax status with the formal structure of a corporation Owners who want limited liability and pass
thru tax status

These comparisons are provided as a general guide and are based upon general information and the way these business entities are typically organized. Consult professional advisors for more accurate detailed comparisons.