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 |