| Characteristics |
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 Owner |
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 have a further
tax on any dividends distributed (subject
to some exclusions) ("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 Corporation election |
DBA
filing |
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 |