Corporate Entity Types Table

Corporate Entity Table Sole Proprietorship vs. C Corporation vs. S Corporation vs. LLC
Sole Proprietorship C Corp S Corp Limited Liability Company (LLC)
Formation Requirements, CostsNoneMust file with state, state specific filing fee requiredMust file with state, state specific filing fee requiredMust file with state, state specific filing fee required
Personal LiabilityUnlimited liabilityShareholders are not typically held liableShareholders are not typically held liableMembers are not typically held liable
Administrative RequirementsRelatively few requirementsElection of board of directors/officers, annual meetings, and annual report filing requirementsElection of board of
directors/officers, annual meetings, and annual report filing requirements
Relatively few requirements
ManagementFull controlShareholders elect directors who manage business activitiesShareholders elect directors who manage business activitiesMembers can set up structure as they choose
TermTerminated when proprietor ceases doing business or upon death.Perpetual: can extend past death or withdrawal of shareholdersPerpetual: can extend past death or withdrawal of shareholdersPerpetual, unless state requires fixed amount of time
TaxationEntity not taxable. Sole proprietor pays taxesTaxed 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 TaxationNoYes, taxed at corporate level and then again if distributed to shareholders in the form of dividendsNoNo
Self Employment TaxSubject to self employment taxSalary subject to self employment taxSalary subject to self employment tax, but
shareholder distributions are not subject to employment tax
Salary subject to self employment tax
Pass Through Tax TreatmentYesNoYesYes
Tax Forms1040IRS Form 1120IRS Form 1120S Shareholders get K-1 for personal tax returns1 member: sole proprietor IRS Form 1040 - Schedule C Partnership: IRS Form 1065, Members get K-1
Transferability of InterestNoShares of stock are easily transferredYes, but must observe IRS regulations on who can own stockPossibly, depending on restrictions outlined in the operating agreement
Capital RaisingIndividual 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 OperationEasiestMust have annual meetings, Board of Directors meetings, corporate minutes, and stockholder meetingsMust have annual meetings, Board of Directors meetings, corporate minutes, and stockholder meetingsEasy, some states may require more than others

Related: Legal Forms Tax Tables Business Plan Business Structure Business Types

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.

1 COMMENT

  1. Sole proprietorships, partnerships, and S Corporations are often call “pass-through entities”. This is because the business itself isn’t taxed. The profits flow through to the owners’ personal tax returns and are taxed at their personal tax rate. In contrast, a C Corporation gets hit with double taxation: once at the company level and again at the owner/shareholder level.

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