| 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 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. |
