Types of Legal Ownership

Ownership Structures

Sole Proprietor

General Partnership

Limited Liability Company (LLC)

Corporation

Number of Owners

One or more

Multiple

Formation Difficulty

Low

Medium

Liability

Sole proprietor has unlimited liability.

Officers/shareholders are not typically responsible for the debts of the corporation.

Operational Requirements

There are relatively few legal requirements.

Formal board of directors, annual meetings, and annual reporting required.

Management

Sole proprietor has full control of management and operations.

Members have an operating agreement that outlines management.

Federal Taxation

It is not a taxable entity. Each partner pays tax on his/her share of income and can deduct losses against other sources of income.

It is taxed at the entity level. If dividends are distributed to shareholders, they are also taxed at the individual level.