|
Characterisitcs
|
Sole
proprietorship
|
General
Partnership
|
Limited
Liability
Company
|
Sub Chapter S
Corporation
|
Corporation
(aka C-Corp)
|
|
FORMATION
|
No State Filing
Requirement
|
Partnership
agreement between
two or more parties. No state filing required
|
State filing required
|
State filing required
|
State filing required
|
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DURATION OF
EXISTANCE
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Dissolved if sole
proprietor ceases doing
business or dies
|
Dissolves upon
death or withdrawal
of a partner unless
safeguards are in
place in a partnership
agreement.
|
Dependent on the
requirements imposed by the state of formation.
|
Perpetual
|
Perpetual
|
|
LIABILITY
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Sole proprietor has
unlimited liability
|
Partners have
unlimited liability
|
Members not typically
liable for the debts of the LLC
|
Shareholders are
typically not personally
liable for the debts of
the corporation
|
Shareholders are
typically not personally
liable for the debts of
the corporation
|
|
OPERATIONAL
REQUIREMENTS
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Relatively few legal
requirements
|
Relatively few legal
requirements
|
Some formal
requirements but less formal than
corporations
|
Board of directors,
officers, annual
meetings, and annual
reporting required
|
Board of directors,
officers, annual
meetings, and annual
reporting required
|
|
MANAGEMENT
|
Sole proprietor has full
control of management
and
operations
|
Typically each
partner has an equal
voice, unless
otherwise arranged
|
Members have an
operating agreement
that outlines
management
|
Managed by the
directors, who are
elected by the
shareholders
|
Managed by the
directors, who are
elected by the
shareholders
|
|
TAXATION
|
Not a taxable entity.
Sole proprietor pays
all taxes
|
Not a taxable entity. Each partner pays tax on his/her share of income and can deduct losses against other sources of income
|
If properly structured
there is no tax at the
entity level. Income/loss is passed through to
members.
|
No tax at the entity
level. Income/loss is
passed through to the
shareholders
|
Taxed at the entity level.
Also, If dividends are
distributed to
shareholders, dividend
income is taxed at the
individual level.
|
|
PASS THROUGH
LOSS/PROFIT
|
Yes
|
Yes
|
Yes
|
Yes
|
No
|
|
DOUBLE
TAXATION
|
No
|
No
|
No
|
No
|
Yes, if income is
distributed to
shareholders in the form
of dividends.
|
|
COST OF
CREATION
|
None
|
Minimal
|
State filing fee required
|
State filing fee required
|
State filing fee required
|
|
RAISING CAPITAL
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Often difficult unless
individual contributes
funds
|
Contributions can
be made from
partners, and more
partners can be
added
|
Possible to sell
interests, though subject to operating
agreement restrictions
|
Shares of stock are sold to raise capital
|
Shares of stock are sold
to raise capital
|
|
TAX FORMS
|
1040
|
1065
|
1120 OR 1065
(depending on election)
|
1120-S
|
1120
|
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TRANSFERABILITY
OF INTEREST
|
No
|
No
|
Possibly, depending on restrictions outlined in the operating agreement
|
Yes, but must observe IRS regulations on who
can own stock
|
Shares of stock are easily transferred |
