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Business Comparison

The law firm disclaims all liability of the below business comparison table, and strongly recommends that the reader consult with a competent attorney licensed to practice in the state where the business entity is formed as state laws vary. Do NOT rely on this comparison. This table does NOT establish an attorney-client relationship nor does it constitute legal advice.

Business Type Definition Liability Management &Control Ease of Setup Taxation
General Partnership Association of (two) 2 or more people to carry on as co-owners of a business for profit Partners: total, unlimited, including personal assets General partners: each has equal control Few tax benefits Profits taxed to partners based on ownership percentages. Can claim on personal taxes.
Limited Partnership Special partnership type with limited legal liabilities General partners: personally.Limited partners: liable for their business instrument. General partners: management control.Limited partners: none. Easy to set up and maintain Partners: profits personally, on ownership percentages. Can claim on personal taxes.
Limited LiabilityPartnership Special partnership type made up of general partners only Each general partner has limited legal liability Each general partner has equal control Easy to set up and maintain Special tax consequences
S Corporation (For profit)(IRS determines tax status) Organized with intent of making a profit, required to issue stock shares Board/officers: very little limited personal liability Board sets policy, controls president. Officers conduct day-to-day operations Must meet certain IRS rules. Cumbersome process Partners: profits personally, taxed based on ownership percentages. Shareholders: taxed on dividends
C Corporation (For profit)(IRS determines tax status) Organized with intent of making a profit, required to issue stock shares Limited, but not total from lawsuits. Shields owners personally. Shareholders, directors, officers run. Directors generally set policies. Most complex business structure. Stricter government control Earnings “double-taxed”: shareholders get dividends. Some other tax benefits.
Not for Profit Corporation No owners; gives no income (except salaries/expense) to members, directors, or officers. Personal liability protection except for willful misconduct Vested in board of directors and/or voting members May be complex, require more paper work, research May seek tax exemption from IRS (under specific guidelines)
Cooperative Association Group of people for mutual benefit. (Ex: apartment building resident owners) Limited liability Managed by members Any 5/more people or 2/more associations may incorporate Members may be taxed on dividends
Limited Liability Company Unincorporated association, with or without perpetual duration, with one or more members, domestic or foreign Owners risk only their investment. Personal assets not at risk Owners manage, control business. Can be run by one person More complicated than partnership. Easier to set up, maintain than corporation LLC: on earnings. Owners: on business income. Some other tax benefits.
Sole-Proprietorship Unincorporated business Total/unlimited; can take personal assets to pay debts Total personal control Very easy to set up and maintain Owner: personally taxed on profits

Last Modified: February 21st, 2010