|
SOLE PROPRIETORSHIP |
GENERAL PARTNERSHIP |
LIMITED LIABILITY COMPANY |
S CORPORATION |
CORPORATION |
FORMATION | No permission
required
| Agreement of parties involved. No permission required | File with state for permission
| File with state for permission
| File with state for permission
|
| COST OF FORMATION | None | None | Filing fee with state | Filing fee with state | Filing fee with state |
DURATION | Dependent on sole proprietor
| 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 OPERATONS | 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 | Full control of management and operations
| 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 | No taxable entity. Sole proprietor pay all taxes
| 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 |
RAISING CAPITAL | Difficult, unless individual puts in money
| 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 |
