Type of Incorporation

Advantages

Disadvantages

Sole Proprietorship

• Easiest to start
• Flexible management

• Unlimited liability for owner (personal assets at risk)
• Owner cannot participate in company-funded employee benefit plans

Partnership

• Two heads better than one
• Additional source of revenue
• Limited liability for limited partner
• Partnership agreement flexibility

• Unlimited liability for each partner for business debts
• Relative instability of the business
• Divided authority may lead to disharmony

Limited Liability Company

• Limited liability for members
• Pass-through treatment for tax purposes
• No S corp. restrictions on ownership
• Multiple classes of ownership
• Combines best aspects of corporations and partnerships

• Limited liability laws vary from state to state
• Limited Liability Company is relatively new

Corporation

• Possible limited liability
• Continuity transfer of shares
• Easier to raise capital

• Possible heavier taxes
• Legal formalities