What is the Difference Between a Sole Proprietorship, , or LLC?

Careful consideration should be taken when choosing a entity as Sole General that choice can make Corporation a difference in taxes, Proprietorship Partnership (LLC) ability to raise A sole proprietorship is A A corporation is the While not as complex to capital, exposure to a business owned and is business owned most complex of the form as the liability and operated by an between two or more four business corporation, the LLC administrative duties. individual. This is the people. Just like the structures. The combines the ease of least complicated, sole proprietorship, a corporation is a unique operation like a sole Generally, all lowest cost and fastest general partnership legal entity, separating proprietorship or will fall business entity to form. offers low startup costs business and personal partnership with the into one of four The major and is easy to form. assets. In the event the limited liability of a entities including; disadvantage to a sole The partnership also business is sued, the corporation. Another sole proprietorship, proprietorship is has the issue of owner's personal assets benefit of the LLC is not partnership, unlimited liability, as unlimited personal are typically protected. having many of the corporation or any lawsuits from the liability and each Owning a corporation administrative limited liability business will likely partner is personally requires that a number requirements of the company (LLC). Here include the owner’s liable for the business of administrative corporation. personal assets and decisions of the other duties be performed. is a brief summary vice versa. partners. along with some of the advantages and disadvantages.

No matter which type of business you choose to form, make sure you consider all of your options and consult with a legal professional to fully understand the benefits and drawbacks to each type of entity. Pros and Cons of Business Entities

Sole Proprietorship General Partnership LLC

Liability Unlimited personal Unlimited personal Typically limited to Typically limited to Typically limited to liability for the owner liability for the owners investment investment investment

Taxation of Directly to owner Directly to partners Taxed once at Business profits taxed as Generally taxed as a Income corporate level and personal income of partnership again as dividends shareholders

Self- Yes Yes if general partner, No, since payment for No, since payment for Depends on tax status of Taxes generally no if limited employment is in the form employment is in the form LLC partner of wages of wages

Complexity of Easiest to start Relatively easy to start. Most complex. File with Most complex. File with File with Secretary of Formation Partnership agreement is Secretary of State, form Secretary of State, form State and in many cases recommended but not bylaws and have board & bylaws and have board & adopt an operating required shareholders meetings shareholders meetings agreement

Entity Pros - Easiest and least Chance of business Limited personal liability Limited liability without - Limited liability with expensive to form success enhanced if for shareholders double taxation like C partnership tax - No separate tax return right combination Corporation treatment of partners - Fewer administrative requirements than corporation

Entity Pros Unlimited liability - Unlimited liability - Cost of formation - Cost of formation - Cost of formation. - Each partner legally - Administrative - Administrative - Tax and liability responsible for the requirements and requirements and treatment of LLCs is not business acts of other recordkeeping recordkeeping consistent across state partners - Double taxation of profits lines

Typically Owner of a Owners of a small business Company seeking Company seeking some Company wanting to Best For with no employees and with no employees and significant outside investment or wanting to shield personal assets little risk of being sued little risk of being sued investment shield personal assets

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No matter which type of business organization you choose to form, make sure you consider all of your options and consult with a legal professional to fully understand the benefits and drawbacks to each type of entity.