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LLC vs S Corp vs C Corporation
Sole Proprietorship vs. C Corporation vs. S Corporation vs. LLC
 
Sole
Proprietorship
C Corp
S Corp
Limited Liability Company (LLC)
Formation
Requirements,
Costs
None
Must file with state,
state specific filing
fee required.
Must file with state,
state specific filing
fee required.
Must file with state, state specific filing
fee required.
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.
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.
Term
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 not taxable.
Sole proprietor
pays taxes.
Taxed at corporate
rate and possible
double taxation:
Dividends are taxed
at the individual level
if distributed to
shareholders.
No tax at the entity
level. Income passed
through to the
shareholders.
No tax at the entity level. Income passed
through to members.
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, but
shareholder
distributions are not
subject to
employment tax.
Salary subject to self 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
Shares of stock are
easily transferred.
Yes, but must observe
IRS regulations on
who can own stock.
Possibly, depending on restrictions
outlined in the operating agreement.
Capital Raising
Individual provides
capital.
Shares of stock are
sold to raise capital
(Securities laws
apply).
Shares of stock are
sold to raise capital.
Limitations prevent S
corp stock ownership
by corporations.
May sell interests, but subject to
operating agreement
(Securities laws may also apply).
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.
For many small business owners choosing a C corp, S Corp, or Limited Liability Company (LLC) is the first step in incorporating. The above
entity comparison table was designed as a helpful reference and is not intended as tax or legal advise. We do not provide tax or legal advice.
If you feel like you may need tax or legal advice it's recommended that you contact an attorney or CPA.   
Related:
Incorporating
Legal Forms
Tax Tables
Business Plan
Business Structure  
Business Types
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