Choice of Entity Chart

by admin

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)

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