Entity Comparison Chart

Before starting the incorporation process, you will need to choose the proper business structure. LegalFilings Comparison Chart helps you quickly compare entity characteristics, including the advantages and disadvantages of forming a C Corporation, Subchapter S Corporation, or LLC.

Entity Characteristics	Sole Proprietorship	Partnership	LLC	S-Corp	C-Corp
Requirements for Creation	No state permission requirements	Parties must agree to form partnership. No state permission requirements	Must file with state for creation	Must file with state for creation	Must file with state for creation
Life of Entity	Life of sole proprietor	Death of partner causes dissolution	Generally a fixed period (usually 30 years)	Unlimited	Unlimited
Liability to Parties Involved	Unlimited liability for sole proprietor	Unlimited liabilitiy for partners	LLC members not personally liable for company debts	Shareholders not personally liable for corporate debts	Shareholders not personally liable for corporate debts
Formal Requirements for Operation	Few legal requirements	Few legal requirements	Some requirements, but less than corporations	Board of directors, officers, annual meetings, and annual reports	Shareholders not personally liable for corporate debts.directors, officers, annual meetings, and annual reports. Board of directors, officers, annual meetings, and annual reports
Entity Management Characteristics	Sole proprietor is the manager and operator	Partners generally have equal voice	Members agree to the form of management by either members or hired management	Managed by the officers and the board of directors, the directors being elected by the shareholders, and the officers being appointed by the directors	Managed by the officers and the board of directors, the directors being elected by the shareholders, and the officers being appointed by the directors
Taxation Issues	There is no taxable entity. The sole proprietor pays taxes in the form of income taxes	Partners pay taxes on their share of the income and deduct losses against other sources of income	Can elect taxation method. For example, can be taxed as a corporation or can elect to have no company tax liability	Corporation has no tax liability. Taxes are paid on an individual income tax level by the shareholders when profits are passed	Corporation is taxed as well as are the individual shareholders when corporate profits are passed in the form of dividends (this is known as double-taxation).
Taxation Method	Income tax on proprietor	Income tax on partner’s share of partnership income	Can elect taxation method. Generally no tax at the company level	Generally no tax at the company level	Profits subject to double-taxation
Cost of Entity Formation	None	None	State filing fees	State filing fees	State filing fees
Interest Transfer Issues	Individual may sell	Addition of partners or additional sale of partnership interests to existing partners	Sale of member interests may take place subject to company policy	Shares of stock may be sold to raise capital, subject to federal and state securities laws	Shares of stock may be sold to raise capital, subject to federal and state securities laws.

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