Compare Business Entities

Use the chart below to compare the most popular business structures.

Limited Liability CompanyS-CorporationC-CorporationSole Proprietorship
Filing FeeCertificate of formation and filing fee of $300 paid to the Texas Secretary of State.Certificate of formation and filing fee of $300 paid to the Texas Secretary of State.Certificate of formation and filing fee of $300 paid to the Texas Secretary of State.Assumed Name Certificates are filed with County where doing business (Cost is roughly $20, but varies by County)
LiabilityMembers are typically not personally liable for the LLC obligations or debts.Shareholders are typically not personally liable for the s-corporation obligations or debtsShareholders are typically not personally liable for the c-corporation obligations or debtsNo liability protection. Sole Proprietor’s personal assets can be seized to satisfy business obligations or debts
Duration of ExistencePerpetual, unless otherwise provided in the governing documentsPerpetual, unless otherwise provided in the governing documentsPerpetual, unless otherwise provided in the governing documentsUntil Sole Proprietor ceases doing business or dies
Number of OwnersNo restrictions; single member LLCs permitted in TexasNo more than 100No Restrictions.1
ManagementCan be managed by the member(s) or by a manager or group of managersOfficers manage day-to-day activities; Directors manage the officers and the overall company; Directors are elected and therefore managed by the shareholdersOfficers manage day-to-day activities; Directors manage the officers and the overall company; Directors are elected and therefore managed by the shareholdersManaged by the sole proprietor
Governing DocumentOperating Agreement aka Company AgreementBylawsBylawsNone
TaxationAt the default tax status, there is no tax at the entity level. Income/loss is passed through to members (LLCs can elect to be taxed as a c-corp or s-corp)No tax at the entity level. Income/loss is passed through to the shareholdersTaxed at the entity level. Dividends paid out are taxed at the individual level (aka Double Taxation)Entity not taxable. Sole Proprietor pays taxes
Double TaxationNoNoYes, but only if income is distributed to shareholders in the form of dividends.No
Self Employment TaxNet income subject to self employment tax. May elect s-corporation tax status and pay salary to owner(s) to mitigateSalary subject to self employment tax, but shareholder distributions may not subject to employment taxSubject to self employment taxSubject to self employment tax
Pass Through Income/LossYes, unless the LLC elects to be taxed as a c-corporationYesNoYes
Raising CapitalPossible to sell interests, though subject to operating agreement restrictionsShares of stock are sold to raise capital, but there are restrictions on who can be a shareholder.Shares of stock are easily sold to raise capitalNo capital raising mechanism
Administrative RequirementsRelatively fewMany (i.e. Annual meetings, election of directors, appointing officers)Many (i.e. Annual meetings, election of directors, appointing officers)Least amount
Best Suited For:Most businesses large and small.Small businesses; businesses that wish to take advantage of self employment tax savingsLarge businesses; business that desire to go public or need venture capitalIndividual’s who don’t need liability protection (i.e. no employees, no lease, no contracts, non-litigious industry)
 
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LLC Overview
Corp. Overview
LLC vs Corporation