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 Corp. | S Corp. | 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.