|
Comparison of Types of
Practice |
| Characteristic |
Limited
Liability Company |
Limited
Liability Partnership |
Subchapter
S Professional Corporation |
General
Partnership |
Sole
Proprietorship |
| Personal
Liability of Owners |
Limited, except for
an individual's own professional errors |
Partner are not
liable for acts, errors, omissions, malpractice, malfeasance or
negligence of others unless they supervised or were
involved. In most LLP states, partners are liable for
contractual obligations |
Limited, except for
an individual's own professional errors |
Unlimited |
Unlimited |
| Federal
Income Tax Treatment |
Single level of
taxation, if properly structured |
Partnership taxation |
Single level of
taxation |
Single level of
taxation |
Single level of
taxation |
| Permitted
Number of Owners |
No restriction, but
need at least 2 for partnership tax treatment |
Unlimited |
Limited to 75 |
Unlimited |
One |
| Permitted
Types of Owners |
No restrictions |
No restrictions |
Limited to
individuals, estates, and certain trusts |
No restrictions |
Individual |
| Permitted
Classes of Ownership Interests |
Multiple classes are
permitted |
Multiple classes are
permitted |
You can have only
one class of
stock. The S Corporation is treated as having only class of
stock if all
outstanding shares of the corporation possess identical rights to
distribution and liquidation proceeds. Differences in voting
rights are
allowed if the above requirements are met.
|
Multiple classes are
permitted |
N/A |
| Duration
of Entity |
May be perpetual |
Limited |
May be perpetual |
Limited |
Limited |
| Special
Allocation of Tax Items |
Permitted if
partnership tax treatment applies |
Permitted |
Not permitted |
Permitted if
partnership tax treatment applies |
N/A |
| Centralized
Management |
Entity can be
managed by either managers or members |
Managed by general
partners |
Managed by board of
directors and officers |
Managed by general
partners |
N/A |
| Transferability
of Interests |
Usually limited by
articles or regulations; may be limited by state law |
Generally limited by
state law and partnership agreement |
Usually limited by
shareholder agreement; must comply with subchapter S tax
requirements |
Generally limited by
state law and partnership agreement |
N/A |
| Necessary
Documentation |
Articles of
Organization; regulations; minutes |
Usually a
partnership agreement and annual registration |
Articles of
incorporation; bylaws; minutes |
Usually a
partnership agreement |
Minimal |
| Regulation
of Issue and Sale of Interests |
Federal and state
securities law; state LLC laws |
Interests in LLPs
are probably not securities; interests in limited liability
limited partnerships probably are securities |
Federal and state
securities law; state corporation laws |
State partnership
laws |
N/A |
|
SCOTT
J. FAYE, CPA PC One Executive Blvd., Suite 103
Suffern, NY 10901-4110 Telephone: 914-368-1020 |