The table below shows the basic differences among different business organizations. As always, be sure to consult your attorney or CPA or business advisor to get an in-depth understanding of each business organization; the table below gives basic overview. While there are many advantages and money-saving reasons to incorporate, it's not for everybody. However, you do owe it to yourself to do more research before venturing.
|
Attribute |
Sole Proprietor
|
LLC***
|
Corporation
|
Sub Chapter S
Corporation
|
|
Perpetuity
|
No Ceases on death of
Proprietor
|
Yes
|
Yes
|
Yes
|
|
Transferability
|
No
|
Yes
|
Yes
|
Yes
|
|
Cost of
Formation
|
Low
|
High
|
High
|
High
|
|
Management
|
Centralized
|
Can be centralized
or decentralize
|
Centralized; Board
of directors; Corporate officers
|
Centralized; Board
of directors; Corporate officers
|
|
Limited
Liability of Owners
|
Unlimited
|
Yes
|
Yes
|
Yes
|
|
Taxation of
Income
|
Single
|
Single
|
Double
|
Single
|
|
Deductibility of
Losses
|
Yes
|
Generally
deductible by member to extent of basis; Liability may increase basis for
deducting losses.
|
Deductible by
Corporation
|
Generally
deductible by shareholder; Liabilities do not increase basis for deducting
losses except for direct loans from shareholders
|
|
Tax Year
|
Must use tax year
of proprietor
|
Generally must use
fiscal year of majority interest partners or make section 444 elections.
|
May select any
fiscal year
|
Generally must use
calendar year or make section 444 election.
|
|
Qualified
Retirement Plans – for employee owner
|
Payment to a Keogh
plan or SEP are deductible.
|
Payment
to a Keogh plan or SEP are deductible.
|
Payments to a Keogh
Plan or SEP are deductible.
|
Payments to a Keogh
Plan or SEP are deductible.
|
|
Accumulation of Earnings
|
No Restrictions
|
No Restriction
|
Corporation could
be subject to accumulated earnings tax on unreasonable accumulation.
|
No Restriction
|
|
Use of NOL’s
|
Used to offset
individual’s income subject to certain limits
|
Passed through to
members; Limits apply at member level
|
Used to offset
corporate income subject to certain limits
|
Passed through to
Shareholder; Limits apply at shareholder level
|
|
Charitable
Contribution
|
Deductible by
individual subject to certain percentage.
|
Passed through to
member; Limits apply at member level
|
Deductible by
corporation subject to certain percentage limits
|
Passed through to
Shareholder; Limits apply at Shareholder level
|
