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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) |
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LLC Overview |
Corp. Overview |
LLC vs Corporation |
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