| |
SOLE PROPRIETORSHIP |
GENERAL PARTNERSHIPS |
LIMITED LIABILITY PARTNERSHIP |
| Formation |
• no statutory requirements
• trade name application
• EIN (if you have employees)
|
• no direct statutory rqmts.
• trade name application
• EIN
• partnership agreement
|
• file registration with Secretary of State for a fee
• EIN
• partnership agreement
|
| Management and Control |
• proprietor has sole management authority
|
• shared by partners
|
• shared by partners
|
| Liability of Owner(s) |
• unlimited
|
joint and several
• insurance
• contract
|
• limited on tort claims; joint and several for contract claims
|
| Ability to Raise Capital |
• limited to wealth and borrowing capacity of proprietor
|
• limited by collective wealth and contributions of partners and overall value of business
|
• limited by collective wealth and contributions of partners and overall value of business
|
| Federal Taxation of Entity |
• taxed at individual level
|
• pass through
|
• pass through
|
| Transferability of Ownership Interest |
• no equity interests to transfer or sell
|
• transfer causes technical dissolution
|
• transfer causes technical dissolution
|
| Fringe Benefits |
• must be included in income; up to 40% deductible for health insurance with % increasing
|
• must be included in partner's taxable income; up to 40% deductible; percent of deductibility increasing
|
• must be included in partner's taxable income; up to 40% deductible; percent of deductibility increasing
|
| Deductibility of Losses |
• deductibility aginst income, subject to at-risk rules, PAL's basis
|
• deductibility against income, subject to at-risk rules; PAL's and basis; basis inceases for loans to entity
|
• deductibility against income, subject to at-risk rules; PAL's and basis; basis inceases for loans to entity
|
| Availability of Special Allocations |
• N/A
|
• available
|
• available
|
| Basis Adjustments at Death |
• step up
|
• inside and outside basis increases - See § IRC 754
|
• inside and outside basis increases - See § IRC 754
|
| Eligibility to be an Equity Holder |
• N/A
|
• no limitations
|
• no limitations
|
Note: This information is presented to provide a general overview of small business
options and related services. It is not intended to be an exhaustive representation.
Data has been compiled by the Knowledge Institute for informational purposes only.
Content is provided on an "as is" basis and is not intended to, nor does it, provide
advice or create a customer relationship between the Knowledge Institute, BUZGate
and/or any other organization named herein, and any reader.
| |
LIMITED PARTNERSHIPS |
LIMITED LIABILITY COMPANIES |
CORPORATIONS |
| Formation |
• file registration with Secretary of State for a fee
• EIN
• partnership agreement
• there is an application fee for certificate
|
• file registration with Secretary of State for a fee
• securities form
• EIN
• operating and management agreement
• annual report fee
|
• file registration with Secretary of State for a fee
• securities form
• EIN
• S election (for S Corporations)
• bylaws/shareholders agreements
• annual report fee
|
| Management and Control |
• general partners
|
• may be delegated to manager or retained by members
|
• board of directors or shareholders
|
| Liability of Owner(s) |
general partners
• joint and several limited partners
• limited to investment
|
• limited to investment
|
• limited to investment
|
| Ability to Raise Capital |
• limited by collective wealth and contributions of partners and overall value of business
• securities laws apply to sales of securities
|
• limited by wealth of participating members and overall value of business
• securities laws apply to sales of securities
|
• limited by wealth of participating shareholders and overall value of business
• securities laws apply to sales of securities
|
| Federal Taxation of Entity |
• pass through
|
• pass through
|
• C Corporation - double taxation
• S Corporation - pass through
|
| Transferability of Ownership Interest |
• limited partners can transfer, subject to securities laws issues and partnership restrictions
• general partner transfer causes technical dissolution unless limited partners agree to continuation
|
• freely transferable interests, subject to restrictions in agreement
|
• shares freely transferable subject to shareholder agreement and securities law concerns
|
| Fringe Benefits |
• must be included in partner's taxable income; up to 40% deductible; percent of deductibility increasing
|
• must be included in partner's taxable income; up to 40% deductible; percent of deductibility increasing
|
• C Corporation - deductible to corporation; excluded from employee's gross income
• S Corporation - for 2% or greater shareholder (same as partnership)
|
| Deductibility of Losses |
• deductibility against income, subject to at-risk rules; PAL's and basis; basis inceases for loans to entity
|
• deductibility against income, subject to at-risk rules; PAL's and basis; basis inceases for loans to entity
|
• C Corporation - no shareholder deductions; loss carries forward
• S Corporation - deductions available subject to at-risk rules, PAL's and basis. Loans to entity do not affect basis.
|
| Availability of Special Allocations |
• available
|
• available
|
• not available
|
| Basis Adjustments at Death |
• inside and outside basis increases - See § IRC 754
|
• inside and outside basis increases - See § IRC 754
|
• basis in shares step up but not inside basis of asset
|
| Eligibility to be an Equity Holder |
• no limitations
|
• no limitations
|
• C Corporation - no limitations
• S Corporation - significant limitations; i.e., maximum of 75 shareholders
|
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