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This chart lists the pros and cons of corporations, LLCs, partnerships, sole proprietorships, and more.

Type of Entity Main Advantages Main Drawbacks

Sole Proprietorship Simple and inexpensive to create and operate

Owner reports profit or loss on his or her personal tax return Owner personally liable for business debts

General Partnership Simple and inexpensive to create and operate

Owners (partners) report their share of profit or loss on their personal tax returns Owners (partners) personally liable for business debts

Limited Partnership Limited partners have limited personal liability for business debts as long as they don't participate in management

General partners can raise cash without involving outside investors in management of business General partners personally liable for business debts

More expensive to create than general partnership

Suitable mainly for companies that invest in real estate

Regular Corporation Owners have limited personal liability for business debts

Fringe benefits can be deducted as business expense

Owners can split corporate profit among owners and corporation, paying lower overall tax rate More expensive to create than partnership or sole proprietorship

Paperwork can seem burdensome to some owners

Separate taxable entity

S Corporation Owners have limited personal liability for business debts

Owners report their share of corporate profit or loss on their personal tax returns

Owners can use corporate loss to offset income from other sources More expensive to create than partnership or sole proprietorship

More paperwork than for a limited liability company which offers similar advantages

Income must be allocated to owners according to their ownership interests

Fringe benefits limited for owners who own more than 2% of shares

Professional Corporation Owners have no personal liability for malpractice of other owners More expensive to create than partnership or sole proprietorship

Paperwork can seem burdensome to some owners

All owners must belong to the same profession

Nonprofit Corporation Corporation doesn't pay income taxes

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