The pros and cons of corporations, LLCs, partnerships, sole proprietorships. Type of Entity Main Advantages Main Drawbacks Sole Simple and inexpensive to create and operate, Owner personally liable for business debts Proprietorship owner reports profit or loss on his or her personal tax return General Simple and inexpensive to create and operate, Owners (partners) personally liable for business Partnership owners (partners) report their share of profit or debts loss on their personal tax returns Limited Limited partners have limited personal liability for General partners personally liable for business Partnership business debts as long as they don't participate in debts management. General partners can raise cash More expensive to create than general without involving outside investors in management partnership of business Suitable mainly for companies that invest in real estate Regular Owners have limited personal liability for business More expensive to create than partnership or Corporation debts sole proprietorship Fringe benefits can be deducted as business Paperwork can seem burdensome to some expense owners Owners can split corporate profit among owners Separate taxable entity and corporation, paying lower overall tax rate S Corporation Owners have limited personal liability for business More expensive to create than partnership or debts sole proprietorship Owners report their share of corporate profit or More paperwork than for a limited liability loss on their personal tax returns company which offers similar advantages Owners can use corporate loss to offset income Income must be allocated to owners according from other sources to their ownership interests Fringe benefits limited for owners who own more than 2% of shares Professional Owners have no personal liability for malpractice More expensive to create than partnership or Corporation of other owners sole proprietorship Paperwork can seem burdensome to some owners All owners must belong to the same profession Nonprofit Corporation doesn't pay income taxes Full tax advantages available only to groups Corporation Contributions to charitable corporation are tax- organized for charitable, scientific, educational, deductible literary or religious purposes Fringe benefits can be deducted as business Property transferred to corporation stays there; expense if corporation ends, property must go to another nonprofit Limited Liability Owners have limited personal liability for business More expensive to create than partnership or Company debts even if they participate in management sole proprietorship Profit and loss can be allocated differently than State laws for creating LLCs may not reflect ownership interests latest federal tax changes IRS rules now allow LLCs to choose between being taxed as partnership or corporation Professional Same advantages as a regular limited liability Same as for a regular limited liability company Limited Liability company Members must all belong to the same Company Gives state licensed professionals a way to enjoy profession those advantages Limited Liability Mostly of interest to partners in old line Unlike a limited liability company or a Partnership professions such as law, medicine and accounting professional limited liability company, owners Owners (partners) aren't personally liable for the (partners) remain personally liable for many malpractice of other partners types of obligations owed to business creditors, Owners report their share of profit or loss on their lenders and landlords personal tax returns Not available in all states Often limited to a short list of professions Cooperatives Anti-Trust protection, Sub Chapter - T tax benefit, Management shared, not eligible for some Ease of member/owner change, member/o wners grants and tax exemptions as in donations report their share of profit or loss on their personal and revenue realized by non-profits tax returns, member/o wners have limited personal liability for business debts, not expensive or hard to create .