| | | | | | | | | | |
| 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-2005 | | | 3.12% | .38% | 1.20%* | 0.36% | 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 4.5% income (franchise) tax | | yes | no | no | yes | no |
| 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 18.60%. | | | |
**LLCs can be taxed as partnerships, sole proprietors or corporations. | | | | |
