Personal rates, filed using Schedule C on Form 1040
Business ceases when proprietor leaves the business
Easy to set up
Does not protect against personal liability
Partnership
Assumed name filing, required licenses and registrations
Profit shared by partners at personal tax rates
Dissolves when a partner leaves
Fairly easy to set up; partnership agreement recommended
Does not protect against personal liabilityOnly partial deduction for health expenses
C corporation
Annual reportsBoard of directors meetings
Separate tax return, taxed as separate entityCorporate tax ratesDividends taxed to shareholders
Perpetual existenceMore than one class of ownership are possible (e.g., common and preferred)
Can protect against personal liability of individual shareholders regarding claims against the business
Corporate tax rate is higher than individualDouble taxation of dividendsAdditional administrative costs
S corporation
Similar to C corporation
Taxed at individual rate, Form 1040, Schedule C, E, and SEForm 1120S, Income Tax Return for S Corporation and Form 1120S K-1Must close books at end of year
Similar to a C corporation except must meet certain requirements to be treated as an S corporation
Eliminates double taxation of dividends
Cannot deduct benefits such as health insurance for shareholders owning 2% or more of the companyCannot own subsidiariesCannot retain earningsTypically fiscal year must be a calendarNo more than 35 shareholders
LLCs
Exempt from corporate filings in most statesOperating agreement required
Taxed at individual rate, Form 1040, Schedule C (need approval of IRS)Usually more accounting flexibility than C or S corporations
Somewhat of a hybrid between an S corporation and a C corporation
Taxed at personal rateLimited liability as a corporation