Comparison of Business Entities

Ease of
Operation

Easiest

Must have annual
meetings, Board of
Directors meetings,
corporate minutes,
and stockholder
meetings.

Must have annual
meetings, Board of
Directors meetings,
corporate minutes,
and stockholder
meetings.

Easy, some states may require more
than others.

NONE
(Your business is shown on your personal tax return on a separate schedule)

Must file with State and a filing
fee is required that may vary by State.

Must file with State and a filing
fee is required that may vary by State.

Must file with State and a filing
fee is required that may vary by State.

Personal
Liability

Unlimited liability.

Shareholders are not
typically held liable.

Shareholders are not
typically held liable.

Members are not typically held liable.

Administrative
Requirements

Relatively few
requirements.

Election of board of
directors/officers,
annual meetings, and
annual report filing
requirements.

Election of board of
directors/officers,
annual meetings, and
annual report filing
requirements.

Relatively few requirements… no annual meetings required by Members

 Management

Full control.

Shareholders elect
directors who
manage business
activities.

Shareholders elect
directors who
manage business
activities.

Members can set up structure as they
choose.

 How long does this Entity last?

TERMINATED when
proprietor ceases
doing business or
upon death.

PERPETUAL: can
extend past death or
withdrawal of
shareholders.

PERPETUAL: can
extend past death or
withdrawal of
shareholders.

PERPETUAL: unless state requires     fixed  amount of time.

Taxation

Entity is not separately taxable.
(Your business is shown on your personal tax return on a separate schedule)

Taxed at corporate
rate and possible
double taxation:
Dividends are taxed
at the individual level
if distributed to
shareholders.

No tax at the corporate level. The Income is passed
through to the
shareholders so there is  No double tax.

No tax at the entity level. Income passed
through to Members so there is  No double tax.

Double Taxation

NO

YES
… taxed at
corporate level and
then again if
distributed to
shareholders in the
form of dividends.

NO

NO

Self Employment
Tax

Subject to self
employment tax.

Salary subject to self
employment tax.

Salary subject to self
employment tax.

Salary subject to self employment tax,
but shareholder distributions are not
subject to employment tax.

Pass Through
Tax Treatment

YES

NO

YES

YES

Tax Forms

1040

IRS Form 1120

IRS Form 1120S
Shareholders get K-1
for personal tax
returns.

1 member: sole proprietor IRS Form
1040 - Schedule C
Partnership: IRS Form 1065, Members
get K-1

Transferability of
Interest

NO

YES
Stock shares are
easily transferrable.

YES
… but must
observe IRS
regulations on who
can own stock.

POSSIBLY, depending on restrictions
outlined in the operating agreement.

 Money &  Raising Capital

Capital is provided by the individual Sole Proprietor.

Stock is sold
to raise capital
(Securities laws
apply).

Stock is sold
to raise capital.
(Limitations prevent S corp stock
ownership by corps.
 

May sell interests, but subject to
operating agreement
(Securities laws may also apply).