Comparison Chart
| Entity Type | Liability | Taxation | Formation | Corporate Maintenance |
|---|---|---|---|---|
| Regular C-Corporation | Owners have limited personal liability for business debts. | Owners can split
corporate profit among owners and corporation,
paying lower overall tax rate. Separate taxable entity. Fringe benefits can be deducted as business expense. |
May have an
unlimited number of shareholders. More expensive to create than partnership or sole proprietorship. |
Shares of stock
may be sold to raise capital Formality requirements (e.g. annual reports, minutes, meetings) are required to maintain corporate status. |
| S-Corporation | Owners have limited personal liability for business debts. | Owners report
their share of corporate profit or loss on their
personal tax returns. Income must be allocated to owners according to their ownership interests. Owners can use corporate loss to offset income from other sources. Fringe benefits limited for owners who own more than 2% of shares. |
More expensive to create than partnership or sole proprietorship. | More formality requirements than for a limited liability company which offers similar advantages. |
| Professional Corporation | Owners have no personal liability for malpractice of other owners. Owners have liability for own acts of malpractice. | Option when
certain states do not allow professionals to
form a C-Corp. More expensive to create than partnership or sole proprietorship. All owners must belong to the same profession. |
Formality requirements (e.g. annual reports, minutes, meetings) are required to maintain corporate status. | |
| Non-Profit Corporation | Full tax
advantages available only to groups organized
for charitable, scientific, educational,
literary or religious purposes.
Contributions to charitable corporation are tax-deductible. Fringe benefits can be deducted as business expense. |
Formality
requirements (e.g. annual reports, minutes,
meetings) required to maintain corporate status. Property transferred to corporation stays. there; if corporation ends, property must go to another nonprofit. |
||
| Limited Liability Company | Combines a corporation's liability protection and pass-through tax structure of a partnership. | IRS rules now allow LLCs to choose between being taxed as partnership or corporation. | More expensive to create than partnership or sole proprietorship. | Sale of member
interests may take place per company policy. Significantly easier to maintain than a corporation. |
| Professional Limited Liability Company | Same advantages as
a regular limited liability company. Members have no personal liability for malpractice of other members; however, they are liable for their own acts of malpractice. |
Gives state
licensed professionals a way to enjoy those
advantages. Members must all belong to the same profession. Not available in all states. |
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| Sole Proprietorship | Owner personally liable for business debts. | Owner reports profit or loss on his or her personal tax return. | Simple and inexpensive to create and operate. No filing necessary. | |
| General Partnership | Owner (partners) personally liable for business debts. | Owner (partners) reports profit or loss on his or her personal tax returns. | Simple and inexpensive to create and operate. No filing necessary. | |
| Limited Partnership | Limited partners have limited personal liability for business debts as long as they don't participate in management. | Suitable mainly
for companies that invest in real estate. More expensive to create than general partnership. |
General partners
can raise cash without involving outside
investors in management of business. General partners personally liable for business debts. |