Essay About Owner Reports Profit And Personal Tax Return Owner

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This chart lists the pros and cons of corporations, LLCs, partnerships, sole proprietorships, and more.
Type of Entity
Main Advantages
Main Drawbacks
Sole Proprietorship
Simple and inexpensive to create and operate
Owner reports profit or loss on his or her personal tax return
Owner personally liable for business debts
General Partnership
Simple and inexpensive to create and operate
Owners (partners) report their share of profit or loss on their personal tax returns
Owners (partners) personally liable for business debts
Limited Partnership
Limited partners have limited personal liability for business debts as long as they dont participate in management
General partners can raise cash without involving outside investors in management of business
General partners personally liable for business debts
More expensive to create than general partnership
Suitable mainly for companies that invest in real estate
Regular Corporation
Owners have limited personal liability for business debts
Fringe benefits can be deducted as business expense
Owners can split corporate profit among owners and corporation, paying lower overall tax rate
More expensive to create than partnership or sole proprietorship
Paperwork can seem burdensome to some owners
Separate taxable entity
S Corporation
Owners have limited personal liability for business debts
Owners report their share of corporate profit or loss on their personal tax returns
Owners can use corporate loss to offset income from other sources
More expensive to create than partnership or sole proprietorship
More paperwork than for a limited liability company which offers similar advantages
Income must be allocated to owners according to their ownership interests
Fringe benefits limited for owners who own more than 2% of shares
Professional Corporation
Owners have no personal liability for malpractice of other owners
More expensive to create than partnership or sole proprietorship
Paperwork can seem burdensome to some owners
All owners must belong to the same profession
Nonprofit Corporation
Corporation doesnt pay income taxes
Contributions to