Characteristics /
Entities

Ownership

Personal Liability of Owners

Tax Treatment

Key Documents For Formation

Management of the Business

Capital Contributions

C Corporations

Unlimited number of shareholders allowed; no limit on stock classes

Generally no personal liability of the shareholders for the obligations of the corporation

Corporation taxed on its earnings at the corporate level and the shareholders have a further tax on any dividends distributed (“double taxation”)

Articles of Incorporation

Bylaws

Organizational Board Resolutions

Articles of Incorporation

Stock Certificates

Stock Ledger

Board of Directors has overall management responsibility and officers have day-to-day responsibility

Shareholders typically purchase stock in the corporation, either common or preferred

S Corporations

Up to 75 shareholders allowed; only one basic class of stock allowed

Generally no personal liability of the shareholders for the obligations of the corporation

Entity generally not taxed as the profits and losses are passed through to the shareholders (“pass-through” taxation)

Articles of Incorporation

Bylaws

Organizational Board Resolutions

Articles of Incorporation

Stock Certificates

Stock Ledger

IRS & State S Corporation election

Board of Directors has overall management responsibility and officers have day-to-day responsibility

Shareholders typically purchase stock in the corporation, but only one class of stock is allowed

Sole Proprietorship

One owner

Unlimited personal liability for the obligations of the business

Entity not taxed, as the profits and losses are passed through to the sole proprietor

DBA filing

Sole proprietor manages the business

Sole proprietor contributes whatever capital needed

General Partnership

Unlimited number of general partners allowed

Unlimited personal liability of the general partners for the obligations of the business

Entity not taxed as the profits and losses are passed through to the general partners

General Partnership Agreement

Local filings if partnership holds real estate

The general partners have equal management rights, unless they agree otherwise

The general partners typically contribute money or services to the partnership, and receive an interest in profits and losses

Limited Partnership

Unlimited number of general and limited partners allowed

Unlimited personal liability of the general partners for the obligations of the business; limited partners generally have no personal liability

Entity not taxed, as the profits and losses are passed through to the general and limited partners

Limited Partnership Certificate

Limited Partnership Agreement

The general partner manages the business, subject to any limitations of the Limited Partnership Agreement

The general and limited partners typically contribute money or services to the limited partnership, and receive an interest in profits and losses

LLC

Limited Liability Company

Unlimited number of “members” allowed

Generally no personal liability of the members for obligations of the business

Entity not taxed (unless chosen to be taxed), as the profits and losses are passed through to the members

Articles of Organization

Operating Agreement

The Operating Agreement sets forth how the business is to be managed -- a Manager can be designated to manage the business

The members typically contribute money or services to the LLC, and receive an interest in profits and losses