Compare the advantages and disadvantages of each entity type to find the one that's best for your business.
|Managing your business||
|Limited liability protection |
|LLC members are not personally responsible for business debts or liabilities.
||C-Corp shareholders are not personally responsible for business debts or liabilities.||S-Corp shareholders are not personally responsible for business debts or liabilities.||Non-Profit directors are not personally responsible for NPO debts or liabilities.||Sole Proprietors are personally responsible for business debts and liabilities.|
|Perpetual existence ||varies||
|With the proper planning, LLCs can exist for generations.||S-Corps continue to exist even if the owners or majority shareholders leave or pass away.||C-Corps continue to exist even if the owners or majority shareholders leave or pass away.||Non-Profit organizations and institutions survive after their directors leave.||Sole Proprietorships do not exist when the owner quits or passes away.|
Favorable for raising capital ||varies|
|LLCs can raise money via banks and investors but cannot sell stocks.||S-Corps can get loans from banks, as well as distribute stock to up to 100 people.||C-Corps have the easiest time raising capital as there is no cap on how many people can own stock.||Non-Profits can both get loans and receive tax-deductible donations.||Sole Proprietorships can occasionally receive bank loans but cannot sell stocks.
|Management flexibility |
|LLCs allow for a large variety of management structures based on your specific needs.||Management structures for S-Corps are largely dictated by state and federal law.||Management schemas for C-Corps are largely dictated by state and federal law.||NPOs need to follow strict management laws to guard their non-profit status.
||Since Sole Proprietorships have only one member, there is no management structure.|
|Pass-through taxes ||
|LLC members are taxed on their personal tax returns. The LLC itself is not taxed.||S-Corp shareholders are taxed on their personal tax returns. The company itself is not taxed.||C-Corps are taxed both at the corporate level and again on shareholders' individual returns.||Non-Profits are taxed on a corporate level but may also enjoy a host of tax-exempt benefits.||Sole Proprietorships are taxed only on their owner's tax return.|
Double taxation |
|Since LLCs can be a pass-through entity, owners are taxed on their personal income.||S-Corp shareholders are taxed personally. The S-Corp, however, is not.||C-Corp income is taxed at the corporate level first, then again at the personal level. This is called "double taxation."||Non-Profits are only taxed once and can write off most of their expenses.
||Sole Proprietors are taxed only on their personal tax return.|
|Tax exemptions |
|LLCs can claim deductions but not tax-exempt status.||S-Corps can claim deductions but not tax-exempt status.||C-Corporations are not tax-exempt entities||Not only are donations to Non-Profits tax-exempt, but NPOs can themselves apply for tax-exempt status.
||Sole Proprietorships are the least official business entity and cannot claim tax exemption.|
|State government fees|
|Formation fees ||
|LLCs must pay state fees during the incorporation process. These fees are tax deductible.||S-Corps must pay state fees to legally incorporate. These fees are tax deductible.||C-Corps must pay state fees to become legally recognized. These fees are tax deductible.||Non-Profits pay state fees when they incorporate. These fees are tax deductible.||Since Sole Proprietorships aren't incorporated entities, they don't pay formation or compliance fees.
|Compliance fees |
|While LLCs have less compliance requirements than other entity types, there are reports and licenses that need to be filed and maintained.||S-Corps usually will need to file reports and pay compliance fees on an annual or semi-annual basis.
||C-Corps generally must file reports with their state, as well as a host of other regulatory and compliance fees.||Non-Profits have more compliance responsibilities than other entities as they must continually preserve their tax-exempt status.||Sole Proprietors do not have ongoing compliance fees.|
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