Comparison of Business Entity Legal Structures
Comparison of Business Entity Legal Structures
| | C Corporation | S Corporation | Limited Liability Company | Limited Partnership | General Partnership | Sole Proprietorship | Employee of Another |
| Personal Liability for Business Debts | Shareholders not liable | Shareholders not liable | Members not liable | General Partner(s) personally liable; limited partners not liable. | General Partners personally liable. | Personally Liable. | Not liable for employers debts. |
| Who can legally obligate the business? | Officers and Directors | Officers and Directors | Member managed, any member; manager managed, any manager | Any General partner, no limited partner | Any General Partner | Sole Proprietor | Only when specifically delegated that authority such as being the president of the company. |
| Responsibility for management decisions | Board of Directors, and Officers | Board of Directors, and Officers | Same as above | Same as above | General Partners | Sole Proprietor | Same as above |
| Ownership restrictions | Most states allow one shareholder corporations, some states require two or more shareholders | No more than 75 shareholders allowed; no foreign entities or individuals; shareholders must be individuals, not legal entities. | Most states allow one-member LLC’s | At least one General Partner and at least one Limited Partner | At least two General Partners | Only one sole proprietor and no more | No legal restrictions on ownership except those imposed on other legal entities or by business owner(s) |
| Start-up and ongoing formalities | Articles filed with state; bylaws and annual meetings required | Articles filed with state; Form 2553 filed with IRS; bylaws and annual meetings required | Articles filed with state; operating agreement and annual meetings not required but strongly recommended | LP-1 filed with state, partnership agreement and annual meeting not required but strongly recommended | No state filing; partnership agreement and annual meetings not required but recommended | No state filing; no meetings required | None required |