Compare the different business entities in the U.S.A.

Characteristics Sole
Proprietorship
General
Partnership
Limited Liability
Company
Sub Chapter
S Corporation
C Corporation
Formation No agreement required Agreement of parties involved. No permission required File with state for permission File with state for permission File with state for permission
Duration Dissolved by death of owner or bankruptcy Dissolved by death of partner or bankruptcy Typically limited to a fixed amount of time Perpetual Perpetual
Liability 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
Simplicity of Operation Relatively few legal requirements Relatively few legal requirements Some formal requirements but less formal than corporations Formality of board of directors, officers, annual meetings and annual reporting Formality of board of directors, officers, annual meetings and annual reporting
Management Sole proprietor decides everything Typically each partner has an equal voice unless otherwise arranged Members have operating agreement that outlines management The corporation is managed by the board of directors who are elected by the shareholders The corporation is managed by the board of directors who are elected by the shareholders
Taxation Sole proprietor pays taxes on his/her own tax return Each partner pays tax on his/her share of the 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 of the LLC No tax at entity level. Income / loss is passed through to the shareholders Corporation is a taxable entity.
Pass Through Income/Loss Yes Yes Yes Yes No, corporate losses can’t be deducted by shareholder
Double Taxation No No No No Yes
Cost of Creation None None Filing fee with the state Filing fee with the state Filing fee with the state
Raising Capital No Contributions from partners or an addition of more partners Possible to sell interests. Subject to operating agreement restrictions Sell shares of stock to raise capital Sell shares of stock to raise capital
Transferability of Interest No No Possibly Yes, subject to consent Shares of stock in a corporation are easily transferable