Different Choices of Entities - At a Glance
Limited Liability Company (LLC)
Limited Liability Companies are the most common type entity. LLCs are governed by an operating agreement.
Increased flexibility and freedom
Lower operational overhead
Can be managed by a designated “Manager” or managed by the “Members” (stockholders)
Members are protected by the corporate veil (assuming compliance with California requirements)
Default tax status is pass-through partnership taxation
Corporations are the primary entity for publicly traded companies, and are governed by the Bylaws.
Greater accountability and predictability for outside investors
Shareholders are protected by the corporate veil
Managed by a board of directors, who appoint officers, such as the president and other executives, to carry on the business
Default tax status of a corporation is C-Corporation
Partnerships are similar to LLCs, except that partnerships are unincorporated.
Can arise unintentionally, by two people acting jointly for profit.
Members are not protected by the corporate veil, and are subject to personal liability for all business debts.
As LLCs offer substantially the same benefits as partnerships, general partnerships have become far less common.
A sole proprietorship is an unincorporated business, where the proprietor may file a DBA (Doing Business As) and carry on business without the benefit of a separate business entity.
Members are not protected by the corporate veil
Typically chosen as a cost saving measure or procrastination