LLC Treated As

Attributes Disregarded
Entity --> Corporation S Corporation Partnership Partnership Corporation (single-member LLC)
Taxpayer Entity Shareholder Partner Member LLC
Flow-through of Tax Attrib./NOLs No Yes Yes Yes No
Avoid Double Tax Inefficiency No Yes Yes Yes No
Build Basis in Operations No Yes Yes Yes No
Deliver Step-up at Exit No No Yes Yes No Tax Treatment Looks to
Consolidation Available Yes No (QSSS) No No Yes Owner/Parent
Limited Liability Yes Yes No Yes Yes
Flexibility of Income Allocations Inflexible Inflexible Flexible Flexible Inflexible
Type of Owners Unrestricted Restricted to 100 SHs Unrestricted Unrestricted Unrestricted
Tax Return Form Form 1120 Form 1120S & K-1 for SHs Form 1065 & K-1 for Partners
Calendar Year: Calendar Year: Calendar Year: Calendar Year: Calendar Year: Same due date as Owner/Parent
-Due April 15 -Due March 15 (15th day of 3rd month -Due March 15 -Due March 15 -Due April 15
-Extension is 5 months (due Sept 15) after close of TY) -Extension due Sept. 15 -Extension due Sept. 15 -Extension is 5 months (due Sept
-Extension due Sept. 15 15)
Fiscal Year (not 12/31 or 6/30): Fiscal year: Fiscal year:
-Due 15th day of 4th month after YE May elect fiscal YE (w/ valid business -Due 15th day of 3rd month after -Due 15th day of 3rd month after Fiscal Year (not 12/31 or 6/30):
-Extension due 15th day of 10th purpose) if no more than 3 months of YE YE -Due 15th day of 4th month after
month after YE deferral -Extension is 6 months from that -Extension is 6 months from that YE
Tax Return Due Date
date date -Extension due 15th day of 10th
6/30 Fiscal Year: month after YE
-Due September 15
-Extension due April 15 6/30 Fiscal Year:
-Due September 15
Personal service corp must use -Extension due April 15
calendar YE
Attributes Corporation S Corporation General Partnership Limited Partnership
Entity --> (Subchapter C) (Subchapter S) (GP) (LP) Limited Liability Company (LLC)
An artificial legal entity separate Eliminates double tax that C-Corps An association of 2 or more persons A partnership w/ at least one Allows owners of businesses to gain
and apart from its owners face by meeting certain to carry on as co-owners a business general partner and at least one the liability-limiting advantages of a
--> Created to encourage people to requirements of Subchapter S of the for profit. limited partner corp while enjoying the single, pass-
Description
invest in others' business ideas IRC through tax benefits of a pship
--> Corp retains legal status

Formalities: Formalities: No formalities: Formalities: Formalities:

File Articles of Incorporation or
Corporate Charter w/ state office
(typically the Secretary of State)
--> Articles must include: (RMBCA)
- corp name & status (Corp, Inc);
Formation - # of shares authorized to issue;
- address of registered office;
- registered agent name @ office;
- incorporators' names & address
---> Subchapter C corp if Subchapter
S requirements not met
Same as regular corp.
+ File "S" Election
---> May have no more than 100
SHs who ALL unanimously elect S
status by March 15
--> SHs: individuals, estates, certain
exempt orgs or trusts, and
domestic residents (NO corps,
pships, banks, or insurance
companies)
---> Family members = single SH
---> Corp has only 1 class of stock
Can be formed by verbal or written
agreement, or mere conduct (i.e.,
expressed or implied)
---> May file Statement of
Partnership Authority if they
choose
--> Pship agreement must be in
writing if the pship's purpose
cannot be completed w/in 1 year of
formation
File Certificate of Limited File Articles of Organization with
Partnership with state office (i.e., state (typically Secretary of State)
Secretary of State, State
Corporation Commission)
---> Firm's name must reflect its
limited pship status (i.e., Ltd. or LP)
---> Certificate must include the
names of all of the general
partners (but not the limtied
partners) under RULPA

Operation of the business continues Terminated if: Terminated if:

idefinitely and is not terminated by 1. SHs owning > 50% of vote & 1. No part of the business continues to be carried on by any partner in
the death of a SH or manager nonvoting stock elect to revoke the pship form (i.e. , as of the date it stops doing business as a pship/
2. Eligibility requirements are date = or >50% is sold), OR
violated (terminated that day) 2. Sale or exchange of at least a 50% interest in both capital & profits
Termination 3. Passive investment income w/in a consecutive 12-month period (not w/in a TY).
earned > 25% of gross receipts for 3 - Technical termination: > or = 50%
consec. TYs and had accum. E&P - If a partner sells pship interest, look from that date back if at least 50%
(from C corp) of pship interest was sold/exchanged over last 12 mo.
---> Term. as of beg. of 4th TY
Revised Model Business Revised Model Business Revised Uniform Partnership Act Revised Uniform Limited Revised Uniform Limited Liability
Corporation Act (RMBCA) or Corporation Act (RMBCA) or (RUPA) Partnership Act (RULPA) Company Act (RULLCA)
Governing Law
Deleware Corporate Code Deleware Corporate Code ---> Partners may effectively vary
these provisions
SHs generally not personally liable Same as regular corp. (limited General partner(s) unlimited General Partner: Unlimited Members generally not personally
beyond their investment (managers liability) personal liability for all partnership personal liability liabile beyond their investment
are liable for actions as managers) SHs are not liabile for corporate debt obligations ---> GP can be a corp whose ---> Limited liability w/out forfeiting
---> "piercing of the corporate veil" artificial entity sheilds individual mgmt rights as limited partners
(making shareholders pay corporate owners from personal liab. for biz have to
debts from their own pockets; pay > debts --> Most states protect partners
Liability of Owners their investment). Limited Partner: Only investment is from personal liab. for contractual
---> 3rd parties may refuse to loan at risk (if they do not take part in & tort obligations/debts of the firm
money or to sell to corp on credit mgmt)
unless its owners co-sign or ---> LPs can be an EE, lender, or
otherwise guarantee the obligation guarantor w/ no general liab.
Attributes Corporation S Corporation General Partnership Limited Partnership
Entity --> (Subchapter C) (Subchapter S) (GP) (LP) Limited Liability Company (LLC)
Managed by BOD, who appont Same as regular corp. Owners manage directly or can agree General Partner(s): is (are) exlusive Members manage directly or can
officers to run day-to-day SHs can be employees (separation to appoint managing partner manager(s) agree to appoint a manager
operations of ownership and management) Limited Partner: Ordinarily do not --> like a general pship (member-
Management
manage. Give up certain general managed) or a corp (manager-
mgmt rights in exchange for limited managed)
liability.
SHs are free to transfer ownership SHs generally may transfer Partners cannot transfer ownership Partners (whether general or Absent agreement otherwise,
interest unless they agree otherwise ownership unless they agree interest without unanimous limited) cannot transfer ownership members cannot transfer
Transferability
otherwise, but can't transfer to consent interest without unanimous ownership interest without
foreign or entity SHs consent unanimous consent
Double Taxation: Income taxed at Single "Flow through" taxation but Single "Flow through" taxation Single "Flow through" taxation but Single "Flow through" taxation but
corporate level and taxed again to SHs not managing have passive loss Profits are allocated and taxable limited partners have passive loss members not managing have
SHs when dividends are distributed restrictions. directly to the partners restrictions passive loss restrictions
Taxation - Profits/loss considered distributed ---> May choose to be taxed as
to SHs (even if never received ) corporate entities
- No corporate AMT, PHC, DRD, or
accum. earnings tax
Best Entity Form for Very large entities (e.g., IBM or Most small businesses
General Motors)

Property distributions take outside

basis of FMV
- Distributions of appreciated
Other
property cause gain recognized at
corp level (passed through to SHs)
May use cash basis if not a tax
Attributes Limited Liability Partnership
Entity --> (LLP)
Created primarily to protect
professionals from undue
malpractice liability arising from
Description
errors of their partners
Formalities:
File Statement of Qualification with
state (typically the Secretary of
State)
Formation
Termination
RUPA or RULPA
Governing Law
Partners are generally not liable for
pship obligations, unless caused by
their own negligence or malpractice
of direct reports
--> Greater liab. protection than
general or limited pships
Liability of Owners --> Most states protect partners
from personal liab. for LLP
contractual obligations
--> Must carry min. levels of
malpractice insurance
Limited Liability Limited
Partnership (LLLP)
Allows the general partner(s) of a
limited partnership to enjoy limited relationship.
liability, just like limited partners
Formalities:
File Certificate of Limited
Partnership w/ state office
(typically Secretary of State)
--> May include a one-line
statement in their Certificate of
Limited Partnership (can amend)
---> Only about 25 states have
authorized LLLPs
Revised Uniform Limited
Partnership Act (RULPA)
General partner(s) enjoy limited
liability, just like limited partners
---> Both GPs and LPs will remain
liable for the consequences of torts
that they personally commit while
carrying out pship business
---> 3rd parties must protect
themselves contractually
Joint Venture
(JV) Sole Proprietorship Professional Corporation (PC)
A one-shot general partnership type A single-owner business: the firm's Allows accountants, doctors,
assets and liabilities belong solely to lawyers, & other licensed
its owner. professionals corp benefits (EE
benefits)
No formalities: No formalities: Formalities:
Governed by general pship law, so No formal filing or legal action to Formed pursuant to special
any distinction b/w the two is organize statuory accommodations
generally unimportant for legal ---> May need a tax # and license to
purposes operate
Unlimited personal liability for all Unlimited personal liability: The Limited liability except for their own
JV obligations owner is the business and the malpractice
business is the owner. Thus, owner
is personally liable for any debts
incurred by the business.
Attributes Limited Liability Partnership Limited Liability Limited Joint Venture
Entity --> (LLP) Partnership (LLLP) (JV) Sole Proprietorship Professional Corporation (PC)
Partners manage directly (w/out Each joint venturer has the right to Managed by the owner but other The corporation is a legal entity,
forfeiting limited liab.) or can agree to participate in mgmt persons (e.g., creditors) may have separate and apart form its SHs
appoint a managing partner some input in how the business is
Management
run

Partners cannot transfer ownership

interest without unanimous
Transferability
consent

Single "Flow through" taxation but Single "Flow through" taxation Single "Flow through" taxation. Single taxation: Sole owner pays Double Taxation
partners not managing have passive Profits are allocated and taxable Profits allocated & taxable to joint individual income tax
loss restrictions directly to the partners venturers
Taxation

Best Entity Form for Professional firms (e.g., accounting Single Owner businesses Licensed Professionals (e.g.,
firms and law firms) accountants, doctors, lawyers, etc)

Other