C-corporation

S-corporation

LLC

Partnership

Tax Rate

Graduated tax rates of up to 35% apply  to taxable income over $18.3 million. Personal service corporations are taxed at the 35% rate on all income.

There is no tax to the S corporation except in two limited circumstances: 1) Recognized built-in gains, and 2) Excess passive net income.

There is no tax to the LLC on LLC income. All items of income, gain or loss pass through and are taxed to the members. There is no tax to the partnership for partnership income. All items of income, gain or loss pass through and are taxed to the partners.
Eligible Owners There are no restrictions on eligible owners. May not have more than 100 shareholders. May not have non-individual shareholders, subject to certain exemptions. There are no restrictions on eligible owners. There are no restrictions on eligible owners.
Types of Ownership Interest Stock. There may be different classes of stock. Stock. There may be only one class of stock. However there may be voting and non-voting common stock. Membership Interests. There may be different classes of membership interests. General and Limited partnership units. There may be different classes of partnership interests.
Transferability of Ownership Interest There is limited liability for shareholders, officers and directors. This protection is generally extended to agents and employees as well. There is limited liability for shareholders, officers and directors. This protection is generally extended to agents and employees as well. There is limited liability for shareholders, officers and directors. This protection is generally extended to agents and employees as well. All partners in a general partnership are personally liable without limits. The general partner in a limited partnership is personally liable without limits. There is limited liability for limited partners in a limited partnership to the extent that they do not act as a general partner in assuming management responsibilities of the partnership.
Duration A C corporation continues indefinitely. An S corporation continues indefinitely. An LLC dissolves at the time specified in the operating agreement, or upon the loss of a member (unless the other members agree to continue the LLC). A partnership terminates at the time specified in the partnership agreement or when there is more than a 50% change in partnership interests during any 12 month period.
Management Managed by officers and directors. Managed by officers and directors. Managed either by all members, or by specifically designated managers. Members who participate in management are not personally liable. Managed by general partners. Limited partners who participate in management are personally liable.
Pass-Through of Losses Losses may not be passed through to or be deducted by shareholders. Losses may be passed through to and be deducted by shareholders, subject to certain restrictions, including the basis, at-risk and passive loss limitations. Losses may be passed through to and be deducted by members, subject to certain restrictions, including basis, at-risk and passive loss limitations. Losses may be passed through to and be deducted by partners, subject to certain restrictions, including basis, at-risk and passive loss limitations.
Fiscal Year May use any fiscal year. Personal Service Corporations must use a calendar year, subject to certain exceptions. Must use a calendar year, subject to certain exceptions. Must use the tax year of members having a majority interest in the LLC, or the tax year of all members if there is no majority interest. Must use the tax year of partners having a majority interest in the partnership, or the tax year of all principal partners if there is no majority interest.
Tax Upon Sale or Distribution of Appreciated Assets There is potential double taxation. There is a tax imposed at the corporate level upon the sale or distribution of appreciated assets. Additionally, there is a potential dividend or capital gains tax upon the distribution of sale proceeds to shareholders. There is a single tax at the shareholder level upon the sale of appreciated assets. There is also a potential built-in gains tax at the corporate level if the corporation had appreciated property at the time of conversion from a C corporation to an S corporation. There is a single tax at the member level upon the sale of appreciated assets. Generally, there is no tax upon the distribution of appreciated assets. There is a single tax at the partner level upon the sale of appreciated assets. Generally, there is no tax upon the distribution of appreciated assets.
Tax to Entity Upon Liquidation Taxed on appreciation in assets upon the sale or distribution of assets. This may result in double taxation as these proceeds are distributed to shareholders. There is no tax except for a potential built-in gains tax if a C corporation was converted to an S corporation in the prior 10 years. There is no tax upon the sale or distribution of assets. Gain upon the sale of assets passes to the members. There is no tax upon the sale or distribution of assets. Gain upon the sale of assets passes to the partners.
Tax to Owners Upon Liquidation Gain is recognized to the extent that fair market value of property distributed exceeds the shareholder’s basis in his/her stock. Gain is recognized to the extent that the fair market value of property distributed exceeds the shareholder’s basis in his/her stock. Gain realized upon the liquidating sale of appreciated assets passes to the members. No gain is recognized upon distribution except to the extent that the money distributed exceeds the member’s basis in his membership interest. Gain realized upon the liquidating sale of appreciated assets by the partnership passes to the partners. No gain is recognized upon distribution except to the extent that the money distributed exceeds the partners basis in his partnership units.
Single Owner Issues May have a single shareholder. May have a single shareholder. Single-members LLCs are disregarded entities for federal tax purposes. Some states require a minimum of two members. Charging order protection for the LLC member is challenged because there are no innocent members to protect. A single partner partnership is called a sole proprietorship.
Charging Order Protection for Innocent Owners Charging order protection is not available for shareholders except in Nevada, subject to certain limitations. Charging order protection is not available for shareholders except in Nevada. Charging order protection generally applies to innocent members. Charging order protection generally applies to innocent partners.
Self-Employment Taxes Shareholder-employees are not subject to self-employment tax. The corporation pays the employer’s portion of the withholding tax which equals the self-employment tax. Self-employment tax does not apply dividends or distributions paid to shareholders. Shareholders do not pay self-employment taxes on dividends. They pay self employment tax only on salary payments, provided they receive reasonable compensation for their services. It is generally thought that an S corporation can save a substantial amount of self-employment taxes in many cases when compared to LLC members in the same economic circumstance. Managers may be subject to self-employment taxes on their distributive portion of income, whether or not distributed. Limited partners are not subject to self-employment taxes except for guaranteed payments for services to the partnership. General partners may be subject to self-employment taxes