MyCorporation provides the information your clients need to make informed decisions, including the handy chart below.
| Type of Entity |
Main Advantages |
Main Drawbacks |
| C-Corporation |
- Limited personal liability for business debts
- Deduct employee benefits
- Split profit among owners and corporation, paying lower tax rate
|
- More expensive to create than partnership or sole proprietorship
- Paperwork may seem burdensome
- Separate taxable entity
|
| S-Corporation |
- Limited personal liability for business debts
- Owners report profit/loss on personal tax return
- Owners can use corp. loss to offset other income
|
- More expensive to create than partnership or sole proprietorship
- More paperwork than LLC, with similar advantages
- Income must be allocated to owners according to their ownership interest
- Employee benefits limited for owners
|
| Limited Liability Company (LLC) |
- Combines a corporation's protection from personal liability for business debts and pass-through tax structure of a partnership.
- Significantly easier to maintain than a corporation.
- IRS rules now allow LLCs to choose between being taxed as partnership or corporation.
|
- More expensive to create than partnership or sole proprietorship.
- State laws for creating LLCs may not reflect latest federal tax changes.
|
| Limited Liability Partnership (LLP) |
- Mostly of interest to partners in old line professions such as law, medicine and accounting.
- Owners (partners) aren't personally liable for the malpractice of other partners.
- Owners report their share of profit or loss on their personal tax returns.
|
- Unlike a LLC or a professional limited liability company, owners (partners) remain personally liable for many types of obligations owed to business creditors, lenders and landlords.
- Not available in all states.
- Often limited to a short list of professions.
|
