| Characteristic |
C Corporations |
S Corporations |
Sole Proprietorship |
General Partnership |
Limited Partnership |
LLC |
| Ownership Rules |
Unlimited number of shareholders allowed; no limit on stock classes |
Up to 75 shareholders allowed; only one basic class of stock allowed |
One owner |
Unlimited number of general partners allowed |
Unlimited number of general and limited partners allowed |
Unlimited number of “members” allowed |
| Personal Liability of the Owners |
Generally no personal liability of the shareholders for the obligations of the corporation |
Generally no personal liability of the shareholders for the obligations of the corporation |
Unlimited personal liability for the obligations of the business |
Unlimited personal liability of the general partners for the obligations of the business |
Unlimited personal liability of the general partners for the obligations of the business; limited partners generally have no personal liability |
Generally no personal liability of the members for obligations of the business |
| Tax Treatment |
Corporation taxed on its earnings at the corporate level and the shareholders may have a further tax on any dividends distributed (“double taxation”) |
Entity generally not taxed as the profits and losses are passed through to the shareholders (“pass-through” taxation) |
Entity not taxed, as the profits and losses are passed through to the sole proprietor |
Entity not taxed as the profits and losses are passed through to the general partners |
Entity not taxed, as the profits and losses are passed through to the general and limited partners |
Entity not taxed (unless chosen to be taxed), as the profits and losses are passed through to the members |
| Key Documents Needed For Formation |
- Articles of Incorporation
- Bylaws
- Organizational Board Resolutions
- Articles of Incorporation
- Stock Certificates
- Stock Ledger
|
- Articles of Incorporation
- Bylaws
- Organizational Board Resolutions
- Articles of Incorporation
- Stock Certificates
- Stock Ledger
- IRS & State S
- IRS & State S Corporation election
|
|
- General Partnership Agreement
- Local filings if partnership holds real estate
|
Limited Partnership Certificate
- Limited Partnership Agreement
|
- Articles of Organization
- Operating Agreement
|
| Management of the Business |
Board of Directors has overall management responsibility and officers have day-to-day responsibility |
Board of Directors has overall management responsibility and officers have day-to-day responsibility |
Sole proprietor manages the business |
The general partners have equal management rights, unless they agree otherwise |
The general partner manages the business, subject to any limitations of the Limited Partnership Agreement |
The Operating Agreement sets forth how the business is to be managed – a Manager can be designated to manage the business |
| Capital Contributions |
Shareholders typically purchase stock in the corporation, either common or preferred |
Shareholders typically purchase stock in the corporation, but only one class of stock is allowed |
Sole proprietor contributes whatever capital needed |
The general partners typically contribute money or services to the partnership, and receive an interest in profits and losses |
The general and limited partners typically contribute money or services to the limited partnership, and receive an interest in profits and losses |
The members typically contribute money or services to the LLC, and receive an interest in profits and losses |
