Choosing a Business Entity

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	Sole Proprietor	Partnership	S Corp	C Corp	LLC
Are you protected from Liability?	No	No; all partners are jointly liable for actions of others.	Yes	Yes	Yes
Number of Owners	1	2 or more	No more than 75	Unlimited	Unlimited-one person LLC allowed in most states
Taxation on Income	Personal tax	Profits flow to partners who pay personal tax	Profits flow through to owners, who pay personal tax on it.	The corp. must pay taxes on its profits, and the owners on distributions to them by the corporation.	LLC profits flow to members who pay personal tax. Disadvantage: self employment taxes.
Can Owners Deduct losses form their personal tax payments	Yes	Yes	Yes	No	Yes
Do you have to do payroll paperwork?	Yes	Yes	No	No	Yes
Can you decide how much income or expenses to allocate among owners regardless of the capital each owner invests in the business entity?	Not applicable	Yes	No	No	Yes
Advantages - Pros	easy set up and understand	can allocate income and expenses as agreed among partners	No Social Security or Medicare taxes	100% deductible health insurance, fully deductible medical reimbursement and fringe benefits plans, up to $50,000 profits are taxed at 15% if left in the corporation rather than at your higher, personal income tax rate.	Limited Liability as in a corporation with pass through income benefits of a partnership.
Disadvantages - Cons	Personal liability, self-employment tax	Liable for actions of other partners. Self-employment tax.	no health insurance deduction and limited deductions for home office	cannot use corp. expenses to offset your personal income. if corp. has a lot of profits, doublet taxation occurs	Self employment tax, unsettled, and insufficient law issues as to the legal and tax treatment of this entity.