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 ProprietorshipGeneral PartnershipLimited PartnershipC Corp.S Corp.LLC
Business Owned By Sole proprietorPartnersPartnersShareholdersShareholdersMembers
Number Of Owners Only oneOne minimum1 General & 1 Limited Partner minimum1 to unlimited1 to 1001 to unlimited
Owners have personal liability for business obligations Sole proprietor is liableAll partners are liableOnly general partners are liableNoNoNo
Management decisions made by Sole proprietorGeneral partnersOnly the general partnersBoard of DirectorsBoard of DirectorsMembers unless the LLC elects manager management
Effect on business of an owners death or departure TerminatesTerminates unless Partnership Agreement states otherwiseTerminates unless Partnership Agreement states otherwiseNoneNoneNone unless LLC Agreement or State says otherwise
Transfer of Ownership EasyConsent of all partners usually required by AgreementConsent of all partners usually required by AgreementBy 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 MinimumMinimumInitial filingInitial filing – record meetings of directors & shareholdersInitial filing – record meetings of directors & shareholdersInitial filing
Raising Capital From the sole proprietorFrom the partnersFrom the partnersSale of stock & other permitted instrumentsSale of stock & other permitted instrumentsFrom the members
Income Taxes Paid by sole proprietorPaid by partners unless elect corporate tax statusPaid by partners unless elect corporate tax statusPaid by the corporationPassed thru & paid by the shareholdersPaid by members unless elect corporate tax status
Who Deducts Losses Sole proprietor can deduct from active business incomeActive partners can deduct from active business incomeSpecial rules apply – check with tax advisorCorporationPassed thru to the shareholdersSpecial rules apply – check with tax advisor
Deductible Benefits for Working Owners Not usually but can deduct medical insurance & set up IRA or Keogh retirement planNot usually but can deduct medical insurance  & set up IRA or Keogh retirement planNot usually but can deduct medical insurance & set up IRA or Keogh retirement planMany fringe benefits like stock option & bonus plans - medical & life insuranceNot usually but can deduct medical insurance and set up IRA or Keogh retirement planNot 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 liabilityMultiple owners who want little red tape & are OK with personal liabilityMultiple owners with passive owners wanting limited liability & pass thru tax status without forming an LLCOwners who want limited liability and the ability to reduce overall taxes by splitting income taxesOwners who want limited liability and pass thru tax status with the formal structure of a corporationOwners 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.