Characteristics

Sole Proprietorship

C
Corporation

S
Corporation

Limited Liability Company

Formation

No state filing required.

State filing required.

State filing required.

State filing required.

Duration of Existence

Dissolved if entity ceases doing business or upon death of the sole proprietor.

Perpetual

Perpetual

Dependent on the requirements imposed by the state of formation.

Liability

Sole proprietor has unlimited liability.

Shareholders are typically not responsible for the debts of the corporation.

Shareholders are typically not personally liable for the debts of the corporation.

Members are not typically liable for the debts of the LLC.

Operational Requirements

Relatively few legal requirements.

Board of directors, annual meetings and annual reporting required.

Board of directors, annual meetings and annual reporting required.

Some formal requirements but less formal than corporations.

Management

Sole proprietor has full control of management and operations.

Managed by the directors, who are elected by the shareholders.

Managed by the directors, who are elected by the shareholders.

Members have an operating agreement that outlines management.

Taxation

Not a taxable entity. Sole proprietor pays all taxes.

Taxed at the entity level. If dividends are distributed to shareholders, dividends are also taxed at the individual level.

No tax at the entity level. Income/loss is passed through to the shareholders.

If properly structured there is no tax at the entity level. Income/loss is passed through to members.

Pass Through Income/Loss

Yes

No

Yes

Yes

Double Taxation

No

Yes, if income is distributed to shareholders in the form of dividends.

No

No

Cost of Creation

None 

State filing fee required.

State filing fee required.

State filing fee required.

Raising Capital

Often difficult unless individual contributes funds.

Shares of stock are sold to raise capital.

Shares of stock are sold to raise capital.

Possible to sell interests, though subject to operating agreement restrictions.

Transferability of Interest

No

Shares of stock are easily transferred.

Yes, but must observe IRS regulations on who can own stock.

Possibly, depending on restrictions outlined in the operating agreement