Copyright © 2008 The Money Alert.com. All rights reserved.
The Money Alert
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.
 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
 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

Tax Tables
Robert Valentine, Ca. Insurance License# 0C23496, is a Registered Investment Advisor Representative with Crown Wealth Management, a Registered Investment Advisor and a registered
representative with Securities America, Inc., a Registered Broker Dealer. Securities offered through Securities America, Inc., Member NASD/SIPC. Crown Wealth Management and
Securities America are not affiliated. This site has been published for residents of AZ, CA, FL, IL, MI, MO, and TX. All information herein has been prepared solely for informational
purposes, and it is not an offer to buy or sell, or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular trading strategy. Crown Wealth
Management does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third
party, whether linked to this web site or incorporated herein, and takes no responsibility. All such information is provided solely for convenience purposes only.  Crown Wealth
Management and Securities America do not endorse, control, or receive compensation from any of the third party advertisers within this website. Neither Crown Wealth Management or
Securities America are affiliated with any of the firms or entities listed unless specifically stated.