Business Entities 


SOLE PROPRIETORSHIP

  • Easy to form and no startup costs
  • Easy filing process
  • Simplified taxes
  • Unlimited personal liability

LIMITED PARTNERSHIP

  • Two tiers of partnership: general (unlimited personal liability) and limited (liable only for the money contributed to the partnership)
  • Limited partners may not participate in management or operations of the limited partnership's business
  • More complicated to form

"S" CORPORATION

  • Limited liability 
  • "Pass-through" taxation 
  • Costly to form 
  • Corporate formalities to maintain entity
  • Shareholders limited to 100
  • With a limted exception, individual shareholders must be either a U.S. citizen or permanent resident

LIMITED LIABILITY COMPANY

  • Limited liability
  • Easy to maintain
  • Moderate cost to form
  • "Pass-through" taxation 
  • "Phantom income" problem

GENERAL PARTNERSHIP

  • Formed by two or more "sole proprietors"
  • Easy to form and no startup costs
  • Simplified taxes 
  • Unlimited personal liability (joint and several liability)
  • Phantom income (partners pay taxes on their "pro rata shares" of profits even though partnership did not pay out cash to pay the taxes)

LIMITED LIABILITY PARTNERSHIPS (LLPS)

  • Limited liability for acts and omissions of other LLP partners
  • Liability for personal negligence or willful misconduct
  • Best suited for professional practices: lawyers, doctors, accountants, and other professional practices 

"C" CORPORATION

  • Limited liability 
  • Costly to form
  • Corporate formalities required to maintain entity
  • Double taxation