| Sole Proprietorship | Individual | Controlled by Owner | The owner is personally liable for all business debts of the sole proprietorship. | All business income is considered personal income to the owner and is taxed at personal income tax rates. Taxes are usually reported on a "Schedule C" to the owners tax return. |
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| General Partnership | Two or more individuals or entities according to partnership agreement. Owners can be individuals or entities. | Controlled by the partners in accordance with terms of the partnership agreement. | All partners are jointly and severally liable for all partnership debts. | Each partners' share of partnership income or loss is included on the income tax return of that partner and taxed at that partner's tax rate.
The partnership files an informational tax return ("Form 1065") and a "Form K-1" is given to each partner showing that partners share of the income or loss. |
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| Limited Partnership | Two or more owners, consisting of at least one general partner and one or more limited partners. Owners can be individuals or entities. | General partner(s) run the business and may dissolve the partnership at their discretion. Limited partners are "silent" investors, and usually have little say over the business operation. | General partner(s) are fully liable for all business debts, but limited partners are only liable to extent of the capital they invested in the business which they may lose if the business fails. | Same as general partnership. |
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| "C" Corporation | The corporation may have an unlimited number of owners or "shareholders". Owners can be individuals or entities. | Ownership is by shares of stock in the corporation. The business is managed through a Board of Directors elected by the shareholders. | A shareholder is only liable to the extent of the capital they invested in the business which they may lose if the business fails. | Corporations file tax returns (Form 1120) and pay tax on income at a corporate tax rate. Profits can be distributed to shareholders as "dividends" on stock, and are taxed to the shareholders at that person's personal income tax rate. |
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| Subchapter "S" Corporation | Same as "C" Corporation above, except there are restrictions on how many shareholders an "S" corporation may have. Owners can, with some exceptions, be individuals or entities. | Same as "C" Corporation above. | Same as "C" Corporation above. | The "S" Corporation is the same legal entity as a "C" corporation, but it makes an election with the IRS to be taxed as a partnership, rather than "C" Corporation. As such, the "S" Corporation does not pay tax, but files an information tax return ("Form 1120S") Income is then taxable to the shareholders at their personal income tax rate. |
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| Limited Liability Company | The LLC may have an unlimited number of owners or "members". Owners can be individuals or entities. | Controlled by the members or one or more "managers", as set out in an operating agreement. | Generally same as "C" Corporation above, sometimes increased liability protection in certain circumstances. | An LLC can be taxed as either a "C" Corporation or as a partnership, depending on the election made with the IRS. |
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| Limited Liability Partnership | Two or more owners, consisting of general and limited partners. Owners can be individuals or entities. | Controlled by the general partners in accordance with the partnership agreement. | All partners are only liable to extent of the capital they invested in the business which they may lose if the business fails. | Same as general partnership. |
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