Comparing Business Structures
Which one is right for you?

Tax Rates

Liability

C Corporation

Federal marginal tax rates range from 15% to 39% with an overall maximum rate of 35%. Possibly taxed again at distribution. Shareholders pay tax on dividends. Losses do not pass through to shareholders.

Shareholders are shielded from personal liability for business debts. Only their investment is at risk.

S Corporation

Generally, no federal tax is imposed on the business entity. Income and expenses are allocated among shareholders. Taxable income is subject to individual rates from 10% to 35%, whether profits are distributed or not. Losses pass through to shareholders. Restrictions on loss deductibility apply. State treatment of S corporations may vary.

Shareholders are shielded from personal liability for business debts. Only their investment is at risk.

General Partnership

No federal tax is imposed on the business entity. Income and expenses are allocated among partners and each pays tax of 10% to 35% (plus self-employment tax, if applicable) on their share of partnership profits whether distributed or not. Losses pass through to partners. Restrictions on loss deductibility may apply.

Personal liability rests with each partner.

Limited Liability Company & Limited Liability Partnership

No federal tax is imposed on the  business entity. Income and expenses are allocated to "members" or "partners" and each pays tax of 10% to 35% (plus self-employment tax, if applicable) on their share of LLC or LLP profit, whether distributed or not. Losses pass through to members. Restrictions on loss deductibility may apply.

Members and partners are shielded from personal liability for business debts. Only their investment is at risk.

Sole Proprietors

Reported on Schedule C of Form 1040, income is subject to individual rates of 10% to 35%, plus self-employment tax.

Proprietors are subject to personal liability for all aspects of the business.