| Type of business structure |
Main advantages |
Main Disadvantages |
| Unique Property |
- Easy to create and maintain
- Company and owner are legally the same entity
- No commissions associated with the creation of the economic unit
- The owner can deduct a net business loss from personal income taxes.
|
- The owner is personally liable for any debts, lawsuits, or other business liabilities.
- The owner must pay personal income taxes for all net profits of the business
|
| General Partener |
- Easy to create and maintain
- No commissions associated with the creation of the economic unit
- Owners can report their share of net business losses in personal income taxes
|
- All owners are jointly and personally liable for debts, lawsuits, or other business liabilities.
- Owners must pay income tax on all net business profits
|
| Simple limited partnership |
- Easy to attract investors, as they are only responsible for the full amount of their investment in the company
- Limited partners have limited liability for debts, lawsuits, or other business responsibilities.
- General partners have more freedom to focus their attention on the business
- General partners can raise cash without diminishing their control of the business
- Limited partners can leave the business without dissolving the limited partnership
|
- General partners are jointly and personally liable for debts, judgments or other business obligations
- May be more expensive to create than a general partnership
- Especially suitable for companies such as real estate investment groups or in the film industry
|
| Regular corporation |
- Business owners have limited liability for business debts, judgments, and other liabilities
- Some benefits can be deducted as business expenses
- With good accounting, owners and businesses may be able to pay lower taxes by dividing business profits among owners.
|
- More expensive to establish than a sole proprietorship
- Complicated documentation that must be filed with the secretary of state
- The company must pay its own taxes as a separate tax entity
|
| S Corporation |
- Business owners have limited liability for debts, judgments, and other business liabilities
- The owners share in the net profits of the company and declare their share of personal income taxes.
- Owners share in the net loss from the business and can offset other income by reporting this loss in personal income taxes.
|
- More expensive to establish than a sole proprietorship
- The paperwork is more complicated than the paperwork required for an LLC, but similar advantages
- The ownership interest of the various owners determines their respective income from the profits of the company
- Some benefits are only granted to owners who own more than 2% of the shares of the company
|
| Professional corporation |
- Landlords are not personally liable for the malpractice of other landlords
|
- More expensive to establish than a sole proprietorship
- Paperwork and filings can be onerous for homeowners
- Each owner must be in the same profession as the other owners
|
| Non-profit corporation |
- The corporation does not pay income taxes on money it receives for charitable purposes
- Donors who donate for charity can deduct their donations from income taxes
- Some benefits can be deducted as business expenses
|
- The total tax benefits and advantages can only be used by companies that have been incorporated for charitable, educational, scientific, religious or literary purposes.
- If the property is transferred to a nonprofit corporation, the property must remain with the corporation. Even if the corporation terminates, the property must go to another non-profit organization
|
| Limited Liability Company (LLC) |
- Business owners have limited liability for business debts, judgments, and other liabilities, even if owners exercise significant control of the business
- Company profits and losses can be assigned to owners on different lines than property interests (for example, a 10% owner can be assigned 30% of company profits)
- Owners can choose how the LLC will be taxed, either as a partnership or as a partnership.
|
- More expensive to establish than a sole proprietorship
|
| Professional Limited Liability Company |
- Allows state licensed professionals to enjoy the same benefits as an LLC
|
- The same disadvantages as an LLC
- All members must belong to the same profession
|
| Limited Liability Company |
- Business entities associated with things like law, medicine, and accounting typically use this
- Partners are not responsible for the malpractice of other partners
- The partners bear their share of the gain or loss on their personal income taxes.
|
- Partners remain personally liable for obligations to business creditors, lessors, and lenders
- Not all states allow limited liability companies
- Often limited to a few professions
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