Change & improve
your business type
your business type
There is an unfounded idea that a personal business called “Sole Proprietorship” type of business is good enough to introduce yourself to society, and that is clear that someone has sold you on that idea.
Owning a business in the United Sates is a privilege and the government provides help while you own one. The business itself may be the greatest idea which you do not know at the beginning and it is up to you to take it to the next level.
Don’t you want to increase your benefits? Incorporate!
Incorporating a business is the best idea and with it, you will be recognize by society as a serious business, it will be more trusted and will help you to easily mingle with other corporations.
Business Entity Comparison Chart
A variety of entity types are available to those who seek to start a new business. The appropriate type depends entirely on the business’s needs. Below is a chart to help illustrate the key distinctions among the various business entities.
- slide on the table
| Characteristics /Entities | Ownership | Personal Liability of Owners | Tax Treatment | Key Documents for Formation | Management of the Business | Capital Contributions |
|---|---|---|---|---|---|---|
|
C Corporations |
Unlimited number of shareholders allowed; no limit on stock classes |
Generally no personal liability of the shareholders for the obligations of the corporation |
Corporation taxed on its earnings at the corporate level and the shareholders have a further tax on any dividends distributed (double taxation) |
• Articles of Incorporation • Bylaws • Organizational Board Resolutions • Articles of Incorporation • Stock Certificates • Stock Ledger |
Board of Directors has overall management responsibility and officers have day-to-day responsibility |
Shareholders typically purchase stock in the corporation, either common or preferred |
|
S Corporations |
Up to 75 shareholders allowed; only one basic class of stock allowed |
Generally no personal liability of the shareholders for the obligations of the corporation |
Entity generally not taxed as the profits and losses are passed through to the shareholders (pass-through taxation) |
• Articles of Incorporation • Bylaws • Organizational Board Resolutions • Articles of Incorporation • Stock Certificates • Stock Ledger • IRS & State S Corporation election |
Board of Directors has overall management responsibility and officers have day-to-day responsibility |
Shareholders typically purchase stock in the corporation, but only one class of stock is allowed |
|
Sole Proprietorship |
One owner |
Unlimited personal liability for the obligations of the business |
Entity not taxed, as the profits and losses are passed through to the sole proprietor |
• DBA filing |
Sole proprietor manages the business |
Sole proprietor contributes whatever capital needed |
|
General Partnership |
Unlimited number of general partners allowed |
Unlimited personal liability of the general partners for the obligations of the business |
Entity not taxed as the profits and losses are passed through to the general partners |
• General Partnership Agreement • Local filings if partnership holds real estate |
The general partners have equal management rights, unless they agree otherwise |
The general partners typically contribute money or services to the partnership, and receive an interest in profits and losses |
|
Limited Partnership (LP) |
Unlimited number of general and limited partners allowed |
Unlimited personal liability of the general partners for the obligations of the business; limited partners generally have no personal liability |
Entity not taxed, as the profits and losses are passed through to the general and limited partners |
• Limited Partnership Certificate • Limited Partnership Agreement |
The general partner manages the business, subject to any limitations of the Limited Partnership Agreement |
The general and limited partners typically contribute money or services to the limited partnership, and receive an interest in profits and losses
|
|
Limited Liability Company (LLC) |
Unlimited number of members allowed |
Generally no personal liability of the members for obligations of the business |
Entity not taxed (unless chosen to be taxed), as the profits and losses are passed through to the members |
An "Articles of Organization" form is used in most states. A "Certificate of Formation" is used in DE, ID, IA, MA, MS, NE, NH, PA, TX & WA.
An "Operating Agreement" |
The Operating Agreement sets forth how the business is to be managed. Either one or multiple members or managers are designated to manage the business. |
The members typically contribute money or services to the LLC, and receive an interest in profits and losses |
