Let’s compare C corporations, S corporations, limited liability companies (LLCs), limited liability partnerships (LLPs), general partnerships, and sole proprietorships.

CHOOSING A BUSINESS STRUCTURE—HOW DO THEY COMPARE?
  C Corporations S Corporations LLCs*
and LLPs
General Partnerships Sole Proprietorships
Liability
of owners
Limited, even if shareholders participate in management Limited, even
if shareholders
participate in
management
Limited, even
if members
participate in
management
Unlimited for general partners; limited for limited partners who do not participate in management Unlimited
Number of
owners
No maximum 100 maximum No maximum, usually a minimum of two No maximum, requires a minimum of two One
Profit/loss and distributions Special allocations
permitted for separate
classes of stock
No special
allocations
permitted
Special
allocations
permitted
Special
allocations
permitted
N/A
Transferability
of interests
No restriction
No restriction, but must be to eligible shareholder or "S" status terminates Restricted, typically requires approval of majority of members Generally restricted unless authorized by agreement N/A
Federal income taxes Taxed at corporate level, plus tax on dividends to shareholders No corporate level tax (unless previously a C corporation) None at LLC or LLP level None at partnership level Taxed on individual return
Continuity
of life
Unlimited Unlimited Limited Limited N/A
Avoidance
of double taxation
No
Usually
Yes
Yes
Yes
Tax forms
to file
Form 1120 Form 1120S Form 1065 Form 1065 Form 1040 Schedule C

* LLCs are treated as a partnership for tax purposes.