Top Nav

Comparison of Legal Entity Types

The following contains a table which describes the differences among the various legal entity types.

THE ISSUE SOLE PROPRIETOR PARTNERSHIP S CORP C CORP LLC
THE ISSUE SOLE PROPRIETOR PARTNERSHIP S CORP C CORP LLC
Personal Liability Protection? No No; Not only don’t you get liability protection, all partners are jointly liable for actions of other partners in partnership Yes Yes Yes
Number if owners allowed 1 At least 2; No Top Limit No more than 75 No limit No maximum; 1 person LLC Ok everywhere but Md. & D.C.
How income is taxed Owner pays tax on personal returns Profits flow through to partners, paid on personal returns Profits flow through to partners, paid on personal returns Corporation pays tax on profits; owners pay tax when cash or property is distributed Profits flow through to partners, paid on personal returns
Deduct losses on personal returns Yes Yes Yes No Yes
Avoid payroll paperwork Yes Yes No No Yes
Special allocations of income or expenses among owners Not applicable Yes No No Yes
Is a written agreement advisable when starting? Not necessary Yes Yes Yes Yes