|
|
|
Sole
Proprietor |
Partnership |
S Corp |
C Corp |
LLC |
|
Liability Protection? |
No |
No; all partners are jointly liable
for actions of others. |
Yes |
Yes |
Yes |
|
Number
of
owners |
1 |
2 or more |
No more than 75 |
Unlimited |
Unlimited-one person
LLC allowed in
most states |
|
Tax on Income |
Personal tax |
Profits flow to partners who pay
personal tax |
Profits flow through to owners, who
pay personal tax on it. |
The corp. must pay taxes on its
profits, and the owners on distributions to them by
the corporation. |
LLC
profits flow to members who pay personal tax.
Disadvantage: self
employment taxes. |
|
Can Deduct losses form their personal tax
payments |
Yes |
Yes |
Yes |
No |
Yes |
|
Do
you have to do payroll? |
Yes |
Yes |
No |
No |
Yes |
|
Can
you decide how much income or expenses to allocate
among owners regardless of the assets or money each owner
invests in the business entity? |
Not applicable |
Yes |
No |
No |
Yes |
|
Advantages -
Pros |
easy set up and understand |
can allocate income and expenses as
agreed among partners |
No Social Security or Medicare taxes |
100% deductible health insurance,
fully deductible medical reimbursement and fringe
benefits plans, up to $50,000 profits are taxed at
15% if left in the corporation rather than at your
higher, personal income tax rate. |
Limited Liability as in a
corporation with pass through income benefits of a
partnership. |
|
Disadvantages -
Cons |
Personal liability, self-employment
tax |
Liable for actions of other
partners. Self-employment tax. |
no health insurance deduction and
limited deductions for home office |
cannot use corp. expenses to offset
your personal income. if corp. has a lot of profits,
doublet taxation occurs |
Self employment tax, unsettled, and
insufficient law issues as to the legal and tax
treatment of this entity. |
