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Compare Business Entities

Form a Delaware Corporation
compare business entities

 

Our clients often ask, "Which business entity is right for me—LLC or corporation?"

 

The following chart details the advantages and disadvantages of utilizing each particular type of business entity.

Form a Delaware Corporation
Form a Delaware LLC

 

Compare and contrast the benefits of a sole proprietorship, limited liability company and general corporation, then decide which option is best for your business.

 

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divider   divider Sole Proprietorship divider Limited Liability Company (LLC) divider General Corporation divider
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divider Formation divider No state filing required divider State filing required divider State filing required divider
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divider Liability divider Unlimited personal liability; typically liable for the debts of the sole proprietorship divider Typically, members not personally liable for the debts of the LLC divider Typically, shareholders not personally liable for the debts of the corporation divider
divider
divider Raising Capital divider Contributions often limited to individual´s funds divider Potential to sell interests, contingent upon operating agreement restrictions divider Shares of stock are usually sold to raise capital divider
divider
divider Taxation divider Not a separate taxable entity; owners pay all of the taxes divider Not taxed at entity level if properly structured. Profit/loss passed through directly to the members divider Taxed at the entity level and shareholders receiving dividends are taxed at the individual level divider
divider
divider Formalities divider Minimal legal requirements divider Less formal meetings and minutes are required; state reporting required divider Board of Directors, formal meetings, minutes and annual state reports required divider
divider
divider Management divider Full control and responsibility of management, operations and day-to-day activities divider Members have an operating agreement that outlines management responsibilities divider Shareholders elect Board of Directors to appoint officers for day-to-day management divider
divider
divider Existence divider Typically ceases doing business upon the death of the sole proprietor divider Perpetual unless otherwise specified divider Perpetual unless otherwise specified divider
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divider Transferability divider Ownership non-transferable divider Contingent upon operating agreement restrictions divider Shares of stock are easily transferred divider
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