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Sole Proprietorship
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C Corporation
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S Corporation
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Limited Liability Company
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Formation
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No state filing required.
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State filing required.
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State filing required.
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State filing required.
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Duration of Existence
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Dissolved if entity ceases doing business or upon death of the sole proprietor.
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Perpetual
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Perpetual
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Dependent on the requirements imposed by the state of formation when forming an LLC.
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Liability
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Sole proprietor has unlimited liability.
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Shareholders are typically not responsible for the debts of the corporation.
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Shareholders are typically not responsible for the debts of the corporation.
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Members are not typically liable for the debts of the LLC.
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Operational Requirements
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Relatively few legal requirements.
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Board of directors, annual meetings and annual reporting required.
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Board of directors, annual meetings and annual reporting required.
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Some formal requirements but less formal than corporations.
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Management
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Sole proprietor has full control of management and operations.
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Managed by the directors, who are elected by the shareholders.
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Managed by the directors, who are elected by the shareholders.
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Members have an operating agreement that outlines management.
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Taxation
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Not a taxable entity. Sole proprietor pays all taxes.
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Taxed at the entity level. If dividends are distributed to shareholders, dividends are also taxed at the individual level.
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No tax at the entity level. Income/loss is passed through to the shareholders.
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If properly structured there is no tax at the entity level. Income/loss is passed through to members.
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Pass Through Income/Loss
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Yes
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No
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Yes
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Yes
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Double Taxation
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No
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Yes, if income is distributed to shareholders in the form of dividends.
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No
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No
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Cost of Creation
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None
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State filing fee required.
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State filing fee required.
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State filing fee required.
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Raising Capital
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Often difficult unless individual contributes funds.
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Shares of stock are sold to raise capital.
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Shares of stock are sold to raise capital.
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Possible to sell interests, though subject to operating agreement restrictions.
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Transferability of Interest
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No
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Shares of stock are easily transferred.
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Yes, but must observe IRS regulations on who can own stock.
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Possibly, depending on restrictions outlined in the operating agreement.
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