Some of the factors that will influence which business entity type you select include:

• Where you plan to conduct your business
• Wanting to have limited personal liability for your business activities
• Whether you will have a partner or an investor
• Your expected earnings and deductions
• Desire to minimize your self-employment tax obligation
• Your business goals
• Your tolerance for compliance formalities
• Registration and administrative costs to set up and maintain a business structure

Comparison of the 7 Most Popular Business Structures

Sole Proprietorship

Formation: None

Limited Personal
Liability: No

Transferability of
Interest: No

Duration: Until Withdrawal
or Owner Death

Pass-through Taxation: Not as a
Separate Entity

Ability to Raise Capital: Not as a
Separate Entity

Ownership Limitations: Yes


General Partnership

Formation: None

Limited Personal
Liability: No

Transferability of
Interest: No

Duration: Unlimited

Pass-through
Taxation: Yes

Ability to Raise
Capital: Yes

Ownership
Limitations: No




Limited Liability Company

Formation: State Filing

Limited Personal
Liability
: Yes

Transferability of
Interest
:  Yes
(Often Limited)

Duration: Unlimited

Pass-through Taxation: Yes
(Upon Election)

Ability to Raise Capital: Yes

Ownership Limitations: No

C Corp

Formation: State Filing

Limited Personal
Liability:
Yes

Transferability of
Interest:
Yes

Duration: Unlimited

Pass-through Taxation: No

Ability to Raise Capital: Yes

Ownership Limitations: No

S Corp

Formation: State Filing

Limited Personal
Liability:
 Yes

Transferability of
Interest:
Limited

Duration: Unlimited

Pass-through Taxation: Yes

Ability to Raise Capital: Yes

Ownership Limitations: Yes

Professional Corporation

Formation: State Filing

Limited Personal
Liability:
 Yes

Transferability of
Interest:
Limited

Duration: Unlimited

Pass-through Taxation: No

Ability to Raise Capital: Yes

Ownership Limitations: No

Nonprofit Corporation

Formation: State and Federal Filings

Limited Personal
Liability:
 Yes

Transferability of
Interest:
N/A

Duration: Unlimited

Pass-through Taxation: Tax Exempt

Ability to Raise Capital: Yes

Ownership Limitations: N/A

S Corporation: Capital does have shareholder limits.
Professional Corporation: Requires owners be within the same profession. Personal liability exceptions exist for cases of malpractice.
Nonprofit Corporation: Capital may be raised via donations or grants.

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