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Decision Tools

Choosing a Business Entity

image Sole Proprietorship General Partnership Limited Partnership C Corporation
Limited Liability No No Yes 2 Yes
Pass-through Tax Treatment 3 Yes Generally yes Generally yes No
Difficult to Form/Maintain No Not very Not very Yes
Continuity of Life No No No Yes
Centralized Management Yes Generally no, but partners can elect a committee of managers Yes Yes
Interests Freely Sold/Transferred Yes 5 Generally no Generally no Yes
Available in All States Yes Yes Yes Yes
Minimum Number of Owners One Two Two One
image S Corporation Limited Liability Company (LLC) 1 Limited Liability Partnership (LLP) image
Limited Liability Yes Yes Yes image
Pass-through Tax Treatment 3 Generally yes Yes Yes image
Difficult to Form/Maintain Yes Somewhat Somewhat image
Continuity of Life Yes State law may limit LLC life to a set number of years 4 No image
Centralized Management Yes Generally yes, since members can elect a committee of managers The partnership agreement can centralize management image
Interests Freely Sold/Transferred Not to ineligible S shareholders Yes, but transferee often has more limited rights unless all other members approve of a sale/transfer No image
Available in All States Yes Yes No image
Minimum Number of Owners One Generally two Two image

1 Assumes that the LLC opts for tax treatment as a partnership.
2 Limited liability is available only to the limited partners.
3 In certain circumstances, partnerships and S corporations may be taxed at the entity level.
4 Generally, termination dates for LLCs provided for under state law may be overridden in the LLC agreement.
5 Sole proprietor sells business assets rather than an interest in a business entity.