Business Entity Comparison Table

ItemSole
Proprietorship
General PartnershipLimited Liability Corporation"S" Corporation"C" Corporation
Ownership One individual. At least two partners. At least two members, although some states provide for a "single member LLC." Up to 100 shareholders with one class of stock. Some restrictions on shareholder eligibility. Unlimited number of shareholders with differing classes of stock.
Ease of Formation Easiest entity to form. No state filing required, although registering a "DBA" (doing business as) is common. Moderately easy; no state filing required. Partners contribute cash or property to partnership, with no gain or loss to the partnership, and receive an interest in the profits and losses. More difficult; must file Articles of Organization with the state. Members contribute cash or property to the LLC, with no gain or loss to the LLC, and receive an interest in the profits and losses. More difficult; must file Articles of Incoporation with the state and issue stock to shareholders. No gain or loss on contributed cash or property in exchange for stock. Must take an additional step to file an S Corp election with the IRS. More difficult; must file Articles of Incoporation with the state and issue stock to shareholders. No gain or loss on contributed cash or property in exchange for stock (with restrictions).
Liability Unlimited personal liability of the sole proprietor. Unlimited personal liability of the general partners. Generally no personal liability of members, unless a plaintiff succeeds in "piercing the corporate veil." Generally no personal liability of shareholders, unless a plaintiff succeeds in "piercing the corporate veil." Generally no personal liability of shareholders, unless a plaintiff is succeeds in "piercing the corporate veil."
Business Debts The sole proprietor is liable for business debts. General partners are liable for non-personally guaranteed business debts. Corporation is liable for non-personally guaranteed business debts. Corporation is liable for non-personally guaranteed business debts. Corporation is liable for non-personally guaranteed business debts.
Taxpayer Sole proprietor Partners Members Shareholders Corporation
Tax Year Same as the sole proprietor. Generally the same as the partners. Generally the same as the members. Generally the same as the shareholders. Any generally accepted accounting period.
Tax Forms Schedule C filed with the proprietor's individual Form 1040. Form 1065 and Schedules K-1 are prepared at the partnership level; partners report their share on Schedule E filed with their individual Form 1040. Form 1065 and Schedules K-1 are prepared at the corporate level; members report their share on Schedule E filed with their individual Form 1040. Single member LLCs report on the member's individual Form 1040, Schedule C. Form 1120S and Schedules K-1 are prepared at the S Corporation level; shareholders report their share on Schedule E filed with their individual Form 1040. Form 1120 is filed for the C Corporation; shareholders report any dividend income on Schedule B filed with their individual Form 1040.
Flow Through Yes, the original characteristics of income and other items flows through to the sole proprietor. Yes, the original characteristics of income and other items flows through to the partners. Yes, the original characteristics of income and other items flows through to the members. Yes, the original characteristics of income and other items flows through to the shareholders. No, the C Corporation is not a flow-through entity. Entity is subject to double taxation (earnings at the corporate level, and on dividends distributed to shareholders).
Continuity of Business None, because the sole proprietorship lives and dies with the sole proprietor. Must maintain at least two partners to continue a partnership. Perpetual, corporation is a separate legal entity that can continue with differing sets of members Perpetual, corporation is a separate legal entity that can continue with differing sets of shareholders, but care must be taken to maintain eligibility of S Corp election. Perpetual, corporation is a separate legal entity that can continue with differing sets of shareholders.
Sale of Business Interest Each asset is treated as sold individually. Generally treated as a capital gain or loss. Generally treated as a capital gain or loss. Generally treated as a capital gain or loss. Generally treated as a capital gain or loss.
Ease of Transferability Difficult, because no intangible interest exists, only the material assets of the sole proprietorship. Moderately difficult because of accounting difficulties in determining a partner's basis in their interest in the partnership. Moderately difficult because of accounting difficulties in determining a member's basis in their interest in the LLC. Moderately easy to transfer interest. A shareholder sells their stock holdings in the corporation. Termination of interest may cause tax and accounting effects. Difficulties associated with determing shareholder's basis in their stock. Easiest entity to transfer interest. A shareholder only needs to sell their stock holdings in the coporation.

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