Choosing the Right Entity

The attorneys with the Franchise & Business Law Group are skilled at helping clients understand which entity will best serve their needs as a company. There are often reasons to choose a specific entity that a knowledgeable attorney can help you discover.

Whether you are forming a corporation or an LLC, we help you understand the various factors involved to determine which form of business entity is most appropriate for a particular business, including protection of the owners of the business from debts, obligations and liabilities of the business, and achieving favorable tax treatment. Our attorneys will help you choose which entity type will best suit your business needs.

As a starting point, our corporate and business attorneys suggest that clients review this chart to get an idea of what entity may work best for their particular needs.

CharactersisticsSole ProprietorshipGeneral PartnershipLimited Liability CompanyS-CorporationCorporation
Necessary Legal DocumentationNo Permission RequiredAgreement of parties involved. No permission required.File with State for permissionFile with State for permissionFile with State for permission
Permitted Number of OwnersOneUnlimitted, but at least two or moreUnlimited, but may be only one memberLimite to 75 ShareholdersUnlimited, but may be only one shareholder
Duration of EntityLimitedLimitedUnlimited duration in many statesPerpetualPerpetual
LiabilitySole proprietor is personally liable for all debts and obligations of the business.Each partner is generally personally liable for all debts and obligations of the partnershipMembers not personally liable for the debts and obligations of the LLCShareholders not personally liable for the debts and obligations of the corporationShareholders not personally liable for the debts and obligations of the corporation
Simplicity of OperationRelatively few legal requirementsSome formal requirements but less than corporationsFormality of board of directors, officers and annual meetings, filing of form 2553 to elect S-corp statusFormality of board of directors, officers and annual meetings
ManagementFull control of management and operationsTypically each partner has an equal voice unless otherwise arrangedMembers have an operating agreement that outlines managementThe corporation is managed by the board of directors who are elected by the shareholders, and officers run the corporationThe corporation is managed by the board of directros who are elected by the shareholders, and officers run the corporation
TaxationSingle Level of TaxtionSingle Level of TaxationSingle Level of TaxationSingle Level of TaxationDouble Level of Taxation
Pass Through Income/LossYesYesYesYesNo, corporate losses can’t be deducted by the shareholder