Compare business structures

No

No

Yes

Yes

Yes

Yes

Low

Low

Medium

Medium/High

Low

Medium

Sole Proprietor has unlimited liability for debts and taxes.

Partners have unlimited liability for debts and taxes.

Members are not typically liable for debts other than taxes.

Shareholders are not typically liable for debts other than taxes.

At least one general partner has unlimited liability.

Partners aren’t typically liable for the debt of the LLP.

Relatively few legal requirements.

Relatively few legal requirements

Some formal requirements such as operating agreements and annual reporting.

Board of directors, annual meetings, annual reporting required.

Some formal requirements, but less formal than corporations.

Some formal requirements, but less formal than corporations.

Sole proprietor has full control of management and operations.

Typically each partner has an equal voice, unless otherwise arranged.

Members have an operating agreement that outlines management.

Managed by the directors, who are elected by the shareholders.

Limited partners are excluded from management unless they serve on the board of directors.

All partners have the right to manage the business directly.

Not a taxable entity. The sole proprietor pays all taxes.

Not a taxable entity. Each partner pays taxes on his or her share of income, and can deduct losses against other sources of income.

Depending on structure, there is no tax at the entity level. Income/loss is passed through to members.

Taxed at the entity level. If dividends are distributed to shareholders, dividends are also taxed at the individual level.

Files taxes as a separate entity, must meet certain criteria to avoid being taxed as a corporation.

Taxed as a separate entity. Must meet certain criteria to avoid being taxed as a corporation.

Taxes based on business income. Sole proprietor has unlimited liability.

Taxes based on business income. General partners have unlimited liability.

Taxes based on business entity income. Responsible parties may have liability for trust fund taxes.

Taxes based on business entity income. Responsible parties may have liability for trust fund taxes.

Taxes based on business entity income. General partners have unlimited liability. Limited partners may have liability up to the amount of their investment.

Taxes based on business entity income. General partners have unlimited liability. Limited partners may have liability up to the amount of their investment.