|
|
Sole Proprietorship |
Corporation |
"S" Corp |
Limited Partnership
(L.P.) |
Limited
Liability
Company
(LLC) |
| Ownership |
Single Person |
Unlimited Number of Shareholders |
No More Than 100 Shareholders (Spouses Are Considered One Shareholder) |
2 or More Persons or Entities |
1 or More Persons or Entities |
| Documents Needed to Be Filed to Form Entity |
None Required, However If Public Notice of Trade Name is Desired, You Must File a DBA (Doing Business As) or Fictitious Name |
File Articles of Incorporation With The State |
File Articles of Incorporation With The State |
File Certificate of Limited Partnership With The State |
File Articles / Certificate of Formation / Organization |
| Management |
Owner of Business |
Corporation's Board of Directors |
Corporation's Board of Directors |
General Partner or Partner(s) |
Can Be Member - Managed, or Manager - Managed |
| Maintenance Document Requirements |
None Required |
Need To Maintain Minutes of Meetings and By - Laws |
Need To Maintain Minutes of Meetings and By - Laws |
Need to Draft And Maintain a "Partnership Agreement" |
Need to Draft And Maintain an "Operating Agreement" |
| Lifespan |
Terminates With Death or Disability of Owner |
Unlimited (Perpetual) Existence, Unless Dissolved by Directors or Revoked by State For Non - Compliance |
Unlimited (Perpetual) Existence, Unless Dissolved by Directors or Revoked by State For Non - Compliance |
Generally For a Specific, Agreed - Upon Time Period. Partnership May Be Terminated By Death, Withdrawal, Insolvency, or Legal Disability of a General Partner |
Can Be For a Specific Agreed - Upon Time Period, or It Can be Unlimited (Perpetual) |
| Liability |
Unlimited. Owner Personally Liable For All Debts. Personal Property Can be Attached by Creditors to Settle Business Debts |
Shareholders' Liability Is Limited to Their Investment In The Corporation |
Shareholders' Liability Is Limited to Their Investment In The Corporation |
Unlimited For General Partners. General Partners Are Jointly and Severally Liable For All Debts and Obligations of The Partnership. Limited Partner's Liability Is Limited To The Amount Invested |
Members Are Limited to The Amount of Investment In The Company, or as Specified in Articles of Organization |
| Taxation |
Owner Taxed On Business Profits Reported on Personal Income Tax Return Form 1040 Schedule "C" |
Corporation Taxed on Profits, Shareholders May Have to Pay Taxes on Dividends. Must File Corporate Income Tax Return Form 1120 |
Shareholders Taxed on Profits of Corporation. No Corporate Income Tax On Profits. File Corporate Income Tax Return Form 1120S |
Partners Taxed On Share of Partnership Income. Must File a Partnership Income Tax Return - Form 1065 |
Members Taxed On Share of Company Income (Profits). Taxes Paid on Personal Tax Return - Form 1040. |
| Advantages |
Uncomplicated
Ease of Formation
Ease of Operation
Low Cost of Operation
No Corporate Income Tax |
Legal Entity Separate From Individuals
Limited Personal Liability
Continuity of Existence
Continuity of Management
Easier to Raise Capital
Readily Transferable Interests
|
Legal Entity Separate From Individuals
Limited Personal Liability
Continuity of Existence
Continuity of Management
Easier to Raise Capital
Readily Transferable Interests
No Corporate Income Tax
Net Operating Loss Is Deductible By Shareholders
|
Division of Responsibilities
Limited Personal Liability for Limited Partners
Easier to Raise Capital
No Corporate Income
|
Legal Entity Separate From Individuals
Limited Personal Liability
Continuity of Existence
Continuity of Management
Easier to Raise Capital
No Corporate Income Tax
Net Operating Loss Is Deductible By Shareholders
Less "Formal" Record - Keeping Requirements
|
|
Disadvantages
|
Unlimited Personal Liability
Difficulty in Raising Capital
Lack of Credibility
|
Subject to Government Regulations
Annual Reporting Requirements
Possible Double Taxation by Paying both Corporate and Personal Income Taxes on Profits
|
May Have Only One Class of Stock
Subject to Government Regulations
Annual Reporting Requirements
|
Impermanence of Existence
Difficult To Find Compatible Partners
Annual Reporting Requirement
|
Subject to Government Regulations
Annual Reporting Requirements
Cannot Raise Capital Through Issuance of Stock
|
