If you’re curious about which business license is the best choice for your company, this chart summarizing the differences between the type of business licenses.
Note: Please consult your accountant and/or lawyer before making a decision.
Chart summarizing the differences between the type of business licenses| Characteristics | Sole Proprietorship | General Partnership | Limited Liability Company | S Corp. | C Corp. |
|---|---|---|---|---|---|
| Formation | No permission required | No permission required | File with state for permission | File with state for permission | File with state for permission |
| Duration | Dependent on sole proprietor | Dissolved by death of partner | Limited to a fixed amount of time | Perpetual | Perpetual |
| Liability | Sole proprietor has unlimited liability | Partners have unlimited liability | Not personally liable for the debts of the company | Not personally liable for the debts of the corporation | Not personably liable for the debts of the corporation |
| Simplicity of Operation | Relatively few legal requirements | Relatively few legal requirements | Some formal requirements but less than corporations | Formal. Board of directors, officers, annual meetings and reports | Formal. Board of directors, officers, annual meetings and reports |
| Management | Full control of management and operations | Each partner has an equal voice unless otherwise arranged | Operating agreement that outlines management | Managed by the board of directors who are elected by shareholders | Managed by the board of directors who are elected by shareholders |
| Taxation | No taxable entity. Sole proprietor pay all taxes | Each partner pays tax on his/her share of the income and deduct losses | Can be structured to be taxed either as partnership or corporation | No tax at entity level. Income/loss is passed through to shareholders | Corporation is a taxable entity. |
| Pass Through Income/ Loss | Yes | Yes | Yes | Yes | No, corporate losses can't be deducted shareholder |
| Double Taxation | No | No | No | No | Yes |
| Cost of Creation | None | None | Filing fee with the state | Filing fee with the state | Filing fee with the state |
| Raising Capital | Difficult, unless individual puts in money | Contributions from partners or an addition of more partners | Subject to operating agreement restrictions | Sell shares of stock to raise capital | Sell shares of stock to raise capital |
| Transferability of Interest | No | No | Possibly | Yes, subject to consent | Yes, easily transferable |