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Choosing the Right Business Entity: A Comprehensive Comparison
Selecting the right business entity is one of the most critical decisions for entrepreneurs and business owners. The choice between an LLC, S Corporation, C Corporation, or Partnership has far-reaching implications on liability, taxation, management structure, capital raising, and compliance requirements. A well-informed decision can optimize tax efficiency, protect personal assets, and ensure operational flexibility.
To help business owners navigate this complex decision-making process, we’ve provided a detailed side-by-side comparison of these entity types, outlining their key characteristics, advantages, and disadvantages.
Choice of Entity Comparison
Entity | Limited Liability Company (LLC) | S Corporation | C Corporation | Partnership |
Description | Can be formed by state filing; members manage directly or delegate to managers. Default tax treatment as partnership unless otherwise elected. | Corporation that meets IRS requirements for pass-through taxation. Limited to 100 U.S. shareholders and one class of stock. | Traditional corporate structure with shareholders. Subject to double taxation (corporate and individual levels). | Formed by oral or written agreement (General Partnership) or state filing (Limited Partnership). Pass-through taxation. |