Comparison Chart of Pass

Comparison Chart of Pass-Through Entities

Summarized Chart

Entity Type	Liability Protection	Texas Franchise Tax	Self Employmt Tax	Cash Basis Accounting	Passive Loss Rules Apply
LLC	yes	yes	yes, if active management	maybe	yes
LP	yes	no	no	doubtful	yes
GP	no	no	yes	yes	yes
S Corp	yes	yes	no	maybe	yes
C Corp	yes	yes	no	no	no

Detailed Chart

		S Corporation	General Partnership (GP) & Limited Partnership (LP)	Limited Liability Partnership (LLP)	Limited Liability Company (LLC)
Number of Owners		Maximum of 75	Minimum of 2; no maximum	Minimum of 2; no maximum	Minimum of 2 in order to be taxed as partnership; however, some states permit formation of one-member LLCs which are treated as non-entities for federal purposes unless there is an election to be taxed as a corporation; no maximum number of members
Types of Owners		Owners limited to individuals, estates & certain types of trusts	No limit	No limit	No limit
Type of Capital Structure		Limited to one class of stock (although may have voting and nonvoting stock)	No limit	No limit	No limit
Limited Liability		Generally, shareholders of an S corporation are not personally liable for the debts of the corporation regardless of whether they participate in management. The only exception is when the corporate veil is pierced or if the liability arises from a shareholder's own actions.	In a GP, all partners are jointly and severally liable for debts of the partnership. In a limited partnership, there must be at least one general partner who is liable for the debts of the partnership; the limited partners are not personally liable for partnership debt as long as they do not participate in management.	Under most LLP statues, the partners are jointly and severally liable for the obligations of the LLP. However, a partner is not liable by way of indemnification, contribution, assessment, or otherwise, for the debts, obligations, or liabilities of the LLP arising from the negligence, wrongful acts, or misconduct, committed in the course of the partnership business by another partner or an employee, agent, or representative of the LLP.	In a limited liability company, absent an agreement to the contrary, no members are liable for entity debt regardless of whether they participate in management.
Self-Employment Taxes		Not applicable to S corporation pass-through income	A general partner's share of partnership income is generally subject to self-employment taxes. A limited partner's share of partnership income is generally not subject to self-employment taxes unless the income is a guaranteed payment of services.	A partner's share of partnership income is generally subject to self-employment taxes.	An LLC member is treated as a limited partner for purposes of the self-employment tax unless: (a) the member is a manger; (b) the LLC is member-managed; (c) the LLC is engaged in a business that is off-limits to LPs; or (d) the member would be ineligible to be a limited partner if the entity were organized as an LP.
Income Tax on Entity	Tax on income from operations Tax upon sales of asset Recognized gain upon distribution of asset	No (with the exception of Paragraph 1375 (tax on excess passive investment income)	No tax at entity level	No tax at entity level	No tax at entity level
		No (with the exception of Paragraph 1374 (built-in gains tax))	No	No	No
		No (with the exception of Paragraph 1363 (d) (recapture of LIFO benefits))	Normally no gain or loss at partnership level, although if the distribution is not pro rata and the partnership owns hot assets, there may be ordinary income or capital gain recognized.	Normally no gain or loss at partnership level, although if the distribution is not pro rata and the partnership owns hot assets, there may be ordinary income or capital gain recognized.	Normally no gain or loss at LLC level, although if the distribution is not pro rata and the LLC owns hot assets, there may be ordinary income or capital gain recognized.
Recognized loss upon distribution of assets		No, except liquidating distribution	No	No	No
Ability of Entity to deduct losses		No entity deduction of loss	No entity deduction of loss	No entity deduction of loss	No entity deduction of loss
Ability of Equity Owner to deduct losses		Current deduction (limited by basis, which does not include share of entity); the amount at-risk rules; and passive loss rules)	Current deduction (limited by basis, which does not include share of entity); the amount at-risk rules; and passive loss rules)	Current deduction (limited by basis, which does not include share of entity); the amount at-risk rules; and passive loss rules)	Current deduction (limited by basis, which does not include share of entity); the amount at-risk rules; and passive loss rules)
Effect of Nonliquidating distribution of property on equity owner		Generally recovery of basis and capital gain (with the exception of an S Corp. with an accumulated E&P account)	Non-recognition of gain and basis in distributed property equal to partnership's basis - although if the distribution is not pro rata and the partnership owns hot assets, the partner may recognize ordinary income or capital gain.	Non-recognition of gain and basis in distributed property equal to partnership's basis - although if the distribution is not pro rata and the partnership owns hot assets, the partner may recognize ordinary income or capital gain.	Non-recognition of gain and basis in distributed property equal to LLC's basis - although if the distribution is not pro rata and the LLS owns hot assets, the partner may recognize ordinary income or capital gain.