This chart lists the pros and cons of corporations, LLCs, partnerships, sole proprietorships, and more.
Type of Entity Main Advantages Main Drawbacks
Sole Proprietorship Simple and inexpensive to create and operate
Owner reports profit or loss on his or her personal tax return Owner personally liable for business debts
General Partnership Simple and inexpensive to create and operate
Owners (partners) report their share of profit or loss on their personal tax returns Owners (partners) personally liable for business debts
Limited Partnership Limited partners have limited personal liability for business debts as long as they don't participate in management
General partners can raise cash without involving outside investors in management of business General partners personally liable for business debts
More expensive to create than general partnership
Suitable mainly for companies that invest in real estate
Regular Corporation Owners have limited personal liability for business debts
Fringe benefits can be deducted as business expense
Owners can split corporate profit among owners and corporation, paying lower overall tax rate More expensive to create than partnership or sole proprietorship
Paperwork can seem burdensome to some owners
Separate taxable entity
S Corporation Owners have limited personal liability for business debts
Owners report their share of corporate profit or loss on their personal tax returns
Owners can use corporate loss to offset income from other sources More expensive to create than ...