| Entity
Characteristics |
Sole Proprietorship |
Partnership |
Limited Liability Company |
S-Corp |
C-Corp |
| Requirements
for Creation |
No
state permission requirements |
Parties
must agree to form partnership. No state permission
requirements. |
Must
file with state for creation. |
Must
file with state for creation. |
Must
file with state for creation. |
| Life
of Entity |
Life
of sole proprietor. |
Death
of partner causes dissolution. |
Generally
a fixed period (usually 30 years). |
Unlimited |
Unlimited |
| Liability
to Parties Involved |
Unlimited
liability for sole proprietor. |
Unlimited
liabilitiy for partners. |
LLC
members not personally liable for company debts. |
Shareholders
not personally liable for corporate debts. |
Shareholders
not personally liable for corporate debts. |
| Formal
Requirements for Operation |
Few
legal requirements. |
Few
legal requirements. |
Some
requirements, but less than corporations. |
Board
of directors, officers, annual meetings, and annual
reports. |
Board
of directors, officers, annual meetings, and annual
reports. |
| Entity
Management Characteristics |
Sole
proprietor is the manager and operator. |
Partners
generally have equal voice. |
Members
agree to the form of management by either members or
hired management. |
A
corporation is managed by the officers and the board
of directors, the directors being elected by the shareholders,
and the officers being appointed by the directors. |
A
corporation is managed by the officers and the board
of directors, the directors being elected by the shareholders,
and the officers being appointed by the directors. |
| Taxation
Issues |
There
is no taxable entity. The sole proprietor pays taxes
in the form of income taxes. |
Partners
pay taxes on their share of the income and deduct losses
against other sources of income |
Can
elect taxation method. For example, can be taxed as
a corporation or can elect to have no company tax liability. |
Corporation
has no tax liability. Taxes are paid on an individual
income tax level by the shareholders when profits are
passed in the form of dividends. |
Corporation
is taxed as well as are the individual shareholders
when corporate profits are passed in the form of dividends
(this is known as double-taxation). |
| Taxation
Method |
Income
tax on proprietor. |
Income
tax on partner's share of partnership income. |
Can
elect taxation method. Generally no tax at the company
level. |
Generally
no tax at the company level. |
Profits
subject to double-taxation. |
| Cost
of Entity Formation |
None |
None |
State
filing fees. |
State
filing fees. |
State
filing fees. |
| Interest
Transfer Issues |
Individual
may sell. |
Addition
of partners or additional sale of partnership interests
to existing partners. |
Sale
of member interests may take place subject to company
policy. |
Shares
of stock may be sold to raise capital, subject to federal
and state securities laws. |
Shares
of stock may be sold to raise capital, subject to federal
and state securities laws. |
