Comparison of Entities

CHARACTERISTIC Sole Prop. S Corp C Corp Ptnrshp LLC
1. Limited liability no yes yes no yes
2. Lower IRS audit risk no yes depends* yes depends**
3. Percent of returns audited 1.64% .48% 1.64%* 0.47% depends**
4. Number of owners 1 1-100 1 or more >1 1 or more
5. Can have more than one class of stock NA no yes yes yes
6. Easily select year end other than 12/31 no no yes no no
7. Can deduct 100% of owners health insurance yes yes yes yes yes
8. Deduct owner's group term life of $50k no no yes no no
9. Able to use lower corporate tax rate no no yes no no
10. Earnings are not double taxed yes yes no yes yes
11. No double tax upon liquidation yes yes no yes yes
12. Reduce FICA tax through distributions no yes no no maybe
13. Can avoid FICA for owner's children under 18 yes no no no no
14. Can deduct business losses on personal return yes yes no yes yes
15. Can allocate income disproportionate to ownership NA no no yes yes
16. Inexpensive to form and maintain yes no no maybe maybe
17. Can easily distribute investment back to owners yes yes no yes yes
18. Existence of reliable case law yes yes yes yes no
19. Not subject to Florida 5.5% income tax yes yes no yes yes
20. Not subject to Texas franchise (income) tax yes depends*** depends*** yes depends***
21. Appreciated property distributions are not taxable yes no no yes yes
Note: A "yes" answer suggests a favorable outcome. A "no" answer suggests an unfavorable outcome.
*% of audits for C corps with assets over $10 million was 17.5%.
**LLCs can be taxed as partnerships, sole proprietors or corporations.
***No TX franchise tax for entities with annulized revenues less than $1,030,000.