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    Let’s compare C corporations, S corporations, limited liability companies (LLCs), limited liability partnerships (LLPs), general partnerships, and sole proprietorships.

    CHOOSING A BUSINESS STRUCTURE—HOW DO THEY COMPARE?
      C Corporations S Corporations LLCs*
    and LLPs    		 General Partnerships Sole Proprietorships
    Liability
    of owners    		 Limited, even if shareholders participate in management Limited, even
    if shareholders
    participate in
    management
    		 Limited, even
    if members
    participate in
    management
    		 Unlimited for general partners; limited for limited partners who do not participate in management Unlimited
    Number of
    owners    		 No maximum 100 maximum No maximum, usually a minimum of two No maximum, requires a minimum of two One
    Profit/loss and distributions Special allocations
    permitted for separate
    classes of stock
    		 No special
    allocations
    permitted
    		 Special
    allocations
    permitted
    		 Special
    allocations
    permitted
    		 N/A
    Transferability
    of interests    		 No restriction
    		 No restriction, but must be to eligible shareholder or "S" status terminates Restricted, typically requires approval of majority of members Generally restricted unless authorized by agreement N/A
    Federal income taxes Taxed at corporate level, plus tax on dividends to shareholders No corporate level tax (unless previously a C corporation) None at LLC or LLP level None at partnership level Taxed on individual return
    Continuity
    of life    		 Unlimited Unlimited Limited Limited N/A
    Avoidance
    of double taxation    		 No
    		 Usually
    		 Yes
    		 Yes
    		 Yes
    Tax forms
    to file    		 Form 1120 Form 1120S Form 1065 Form 1065 Form 1040 Schedule C

    * LLCs are treated as a partnership for tax purposes.