BUSINESS ENTITY COMPARISON

Review the business entity table below so that you can make the correct decision when choosing the entity type that is best for your unique business.

	Sole Proprietorship	Single Member LLC	Multi Member LLC	C Corporation	S Corporation*
Limited Liability Protection	No	Yes	Yes	Yes	Yes
Default Tax Treatment	Pass-through taxation: Owner reports profits or losses on personal tax return by completing Schedule C and attaching it to Form 1040, Individual Income Tax Return.	Pass-through taxation: Taxed as a sole proprietor. Owner, called a member, reports profits or losses on personal tax return by completing Schedule C and attaching it to Form 1040, Individual Income Tax Return.	Pass-through taxation: Taxed as a Partnership and therefore an informational tax return is required. Owners, called members, report profits or losses on Form 1065, Return of Partnership Income. Each partner (member) is issued a K-1 for their portion of the profits or losses and the K-1 is used to file the partner's (member's) Form 1040, Individual Tax Return.	Double taxation: Corporation Tax Return is completed and the Corporation is taxed on its profits or losses. The owners, called shareholders, are then taxed on dividends distributed to them on Form 1040, Individual Income Tax Return.	Pass-through taxation: S-Corporation Tax Return is filed. Owners, called shareholders, report profits or losses on Form 1120s, Income Tax Return of an S Corporation, Each shareholder is issued a K-1 for their portion of the profits or losses and the K-1 is used to file the shareholder's Form 1040, Individual Tax Return.
Optional Tax Treatment	N/A	Can elect to be treated as an S Corporation for tax purposes and potentially save money on self-employment taxes when compared to the default LLC tax treatment.	Can elect to be treated as an S Corporation for tax purposes and potentially save money on self-employment taxes when compared to the default C Corporation tax treatment.	Can elect to be treated as an S Corporation for tax purposes and potentially save money on self-employment taxes when compared to the default C Corporation tax treatment.	N/A
Operational Requirements	None required.	Although not required, it is recommended to record meeting minutes and have an operating agreement to ensure the LLC maintains liability protection from its members.	Although not required, it is recommended to record meeting minutes and have an operating agreement to ensure the LLC maintains liability protection from its members.	Establish bylaws, perform initial and annual shareholder meetings, record meeting minutes	Establish bylaws, perform initial and annual shareholder meetings, record meeting minutes
Number of Owners	One owner	One Member	Unlimited Members	Unlimited Shareholders	Up to 100 Shareholders
S Corporation requirements	N/A	If electing to be treated as an S Corp for tax purposes, then: (1) Corporation must be domestic (conducts its affairs in the U.S.) (2) Shareholders must be U.S. Citizens or resident aliens and shareholders cannot be partnerships or corporations (3) Have no more than 100 shareholders (4) Have only one class of stock (5) not be a financial institution, insurance company, or domestic international sales corporation.	If electing to be treated as an S Corp for tax purposes, then: (1) Corporation must be domestic (conducts its affairs in the U.S.) (2) Shareholders must be U.S. Citizens or resident aliens and shareholders cannot be partnerships or corporations (3) Have no more than 100 shareholders (4) Have only one class of stock (5) not be a financial institution, insurance company, or domestic international sales corporation.	If electing to be treated as an S Corp for tax purposes, then: (1) Corporation must be domestic (conducts its affairs in the U.S.) (2) Shareholders must be U.S. Citizens or resident aliens and shareholders cannot be partnerships or corporations (3) Have no more than 100 shareholders (4) Have only one class of stock (5) not be a financial institution, insurance company, or domestic international sales corporation.	(1) Corporation must be domestic (conducts its affairs in the U.S.) (2) Shareholders must be U.S. Citizens or resident aliens and shareholders cannot be partnerships or corporations (3) Have no more than 100 shareholders (4) Have only one class of stock (5) not be a financial institution, insurance company, or domestic international sales corporation.
*Contrary to what most entrepreneurs have been told, an S corporation (also known as "S-Corp") is not a business entity, rather it is an election that is made by an LLC or C corporation for tax treatment purposes after the LLC or C corporation has been formed. As part of our LLC and C corporation business formation process, you'll have the opportunity to make the S-Corp election. (Don't worry, we'll help you file this paperwork too!) Not sure if your LLC or C corporation should make the S-Corp election? You'll have up to 75 days to decide once your business is formed so you don't have to make the decision during the business formation process. If you would like to read more about making the S-Corp election, click on the "Learning Library" button above. If you're ready to file your business, click "Start Filing".