Use the chart below to compare the most popular business structures.
| Limited Liability Company | S-Corporation | C-Corporation | Sole Proprietorship | |
|---|---|---|---|---|
| Filing Fee | 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. | 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) |
| Liability | Members are typically not personally liable for the LLC obligations or debts. | Shareholders are typically not personally liable for the s-corporation obligations or debts | Shareholders are typically not personally liable for the c-corporation obligations or debts | No liability protection. Sole Proprietor’s personal assets can be seized to satisfy business obligations or debts |
| Duration of Existence | Perpetual, unless otherwise provided in the governing documents | Perpetual, unless otherwise provided in the governing documents | Perpetual, unless otherwise provided in the governing documents | Until Sole Proprietor ceases doing business or dies |
| Number of Owners | No restrictions; single member LLCs permitted in Texas | No more than 100 | No Restrictions. | 1 |
| Management | Can be managed by the member(s) or by a manager or group of managers | Officers manage day-to-day activities; Directors manage the officers and the overall company; Directors are elected and therefore managed by the shareholders | Officers manage day-to-day activities; Directors manage the officers and the overall company; Directors are elected and therefore managed by the shareholders | Managed by the sole proprietor |
| Governing Document | Operating Agreement aka Company Agreement | Bylaws | Bylaws | None |
| Taxation | At 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 shareholders | Taxed at the entity level. Dividends paid out are taxed at the individual level (aka Double Taxation) | Entity not taxable. Sole Proprietor pays taxes |
| Double Taxation | No | No | Yes, but only if income is distributed to shareholders in the form of dividends. | No |
| Self Employment Tax | Net income subject to self employment tax. May elect s-corporation tax status and pay salary to owner(s) to mitigate | Salary subject to self employment tax, but shareholder distributions may not subject to employment tax | Subject to self employment tax | Subject to self employment tax |
| Pass Through Income/Loss | Yes, unless the LLC elects to be taxed as a c-corporation | Yes | No | Yes |
| Raising Capital | Possible to sell interests, though subject to operating agreement restrictions | Shares 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 capital | No capital raising mechanism |
| Administrative Requirements | Relatively few | Many (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 savings | Large businesses; business that desire to go public or need venture capital | Individual’s who don’t need liability protection (i.e. no employees, no lease, no contracts, non-litigious industry) |
