If you’re a visual learner, here’s a chart that illustrates some of the differences between the various choices of business entity.
|
Sole Proprietorship |
C Corporation |
S Corporation |
Limited Liability Company |
General Partnership |
|
|
Liability |
Personal |
Limited |
Limited |
Limited |
Personal |
|
Costs in establishing and maintaining |
Low |
Higher |
Higher |
Medium |
Low |
|
Tax |
One level |
Two levels – shareholder and corporate |
Shareholder level only |
One level – Pass-through to members |
One level – Pass-through to partners |
|
Control |
Full |
Restricted |
Restricted |
Members have full control if the LLC is member-managed Members have limited control if the LLC is manager-managed. |
Partners have full control |
|
Exit |
Can sell your business to another |
Free to transfer shares |
Free to transfer but beware of special IRS rules that limit the number of shareholders of the S corp |
Can’t transfer your management rights, but can transfer your economic interests |
Generally, can transfer economic interest |
|
Can it last forever? |
No |
Yes |
Yes |
Yes |
No |
(photo courtesy of: http://flic.kr/p/gt4Hc)
