Question

Compare and contrast the fundamental differences in tax characteristics across different entity types.

Answer 1

Parameter	Sole Proprietorship	General Partnership	LLC	C Corporation	S Corporation
Fundamental Treatment	The business and the owner are fundamentally and legally the same. The two are not different.	Multiple owners, but again the business and the owners are fundamentally and legally the same.	A separate legal entity is created. The owners and the business are legally different.	A separate legal entity is created. The owners and the business are legally different.	A separate legal entity is created. The owners and the business are legally different.
For tax purposes	Income of the Sole Proprietorship is actually treated as the income of the owner. The business is not a taxable entity. The assets, liabilities, income, expenses, gains, losses all belong to the owner.	Income of the General Proprietorship is actually treated as the income of the owners. The business is not a taxable entity. The assets, liabilities, income, expenses, gains, losses all belong to the owners.	Treated like partnership for tax purposes. The taxation structure is "Pass through", that is business is not taxed, in stead gains and losses are passed through to the partners and they pay the taxes.	Business is the taxable entity. Corporations income is taxed at corporate tax rates. Taxes are payable by the corporation.	Treated like partnership for tax purposes. The taxation structure is "Pass through", that is business is not taxed, in stead gains and losses are passed through to the partners and they pay the taxes.
Double taxation	No	No	No	Yes; corporation pay taxes on their profits. When such profits are distributed to the shareholders as dividend, there is one more taxation.	No