Entity Comparison Chart


Entity Comparison Chart Print

This table compares the different types of business structures.


Characteristics
Sole Proprietor
General Partnership
LLC
Corporation
Formation

One individual conducting business.  No state permission required

Agreement of parties involved. No state permission required

File Articles of Organization with AZ Corporation Commission

File Articles of Incorporation with AZ Corporation Commission

Duration

Dissolved by decision of owner, death or bankruptcy of owner

Dissolved by agreement of partners, death of partner or bankruptcy

Can expire on a designated date or be perpetual

Perpetual

Liability

Proprietor Owner has unlimited liability

Partners have unlimited liability

Members not liable for the debts or obligations of the LLC

Shareholders not personally liable for the debts or obligations of the Corporation

Simplicity
of Operation

Very Simple

Relatively few legal requirements

Some formal requirements but less formal than corporations

Formality of Board of Directors, officers, annual meetings and annual reporting

Management

Solely operated by proprietor

Typically each partner has an equal voice unless otherwise arranged

Managed by Member(s) or Manager(s).  The Operating Agreement is the governing document.

Managed by the board of directors who are elected by the shareholders. The bylaws are the governing document.

Taxation

Owner is subject to self-employment tax on all earnings and can deduct losses against other sources of income

Each partner is subject to self-employment tax on all earnings and can deduct losses against other sources of income

If properly structured there is no tax at the entity level. Income/loss is passed through to members of the LLC

C-Corp: Corporation is a taxable entity.

S- Corp:  No tax at entity level. Income / loss is passed through to the shareholders

Pass-Through Income/Loss

Yes

Yes

Yes

C-Corp: No,  corporate losses  can’t be deducted   by shareholder

S-Corp: Yes

Double
Taxation

No

No

No

C-Corp: Yes

S-Corp: No

Cost of
Creation

None

None

Filing fee with the state

Filing fee with the state

Raising
Capital

Contributions from proprietor

Contributions from partners or an addition of more partners

Possible to sell interests. Subject to operating agreement restrictions

Sell shares of stock to raise capital

Transferability
of Interest

No

No

Yes, subject to operating agreement

Shares of stock in a corporation are transferable subject to bylaws