COMPARISON OF VARIOUS FORMS OF DOING BUSINESS

Presented by:Oren D. Saltzman, J. D., L.L.M.

Saltzman & Jalon, LLC

8156 Main Street

Ellicott City, Maryland 21043

(410) 313-8342

Sole Proprietorship:

No written Agreement needed owner individually owns all assets used in business.

Partnership:

Written agreement is suggested, but not required. At least 2 partners are required, partnership owns assets used in business.

C and S Corporation:

Articles of incorporation must be filed with SDAT. The corporation can be formed as a general, close or non-stock corporation. S Corp. may only have 35 shareholders. Corporation owns assets used in business.

LL Company:

Articles of Organization must be filed with SDAT, and must have at least 2 members. Company owns assets used in business.

L. Partnership/LLP:

Certificate of L. Partnership and/or LLP must be filed with SDAT, and must have at least 2 partners. Partnership owns assets used in business.

LIABILITY

Sole Proprietorship:

Unlimited liability of the individual owner. Creditors may reach personal assets.

Partnership:

Unlimited liability of each of the partners. Creditors may reach personal assets.

C and S Corporation:

Limited liability of the Stockholders. Creditors may only go after corporate assets.

LL Company:

Limited Liability of the Members. Creditors may only go after company assets.

L. Partnership/LLP:

Limited liability for Limited Partners. At least one General Partner, who is generally liable for all debts of partnership. L. Partnership creditors may only go after contribution to partnership assets. LLP limits vicarious liability between partners; however, not the case if professional code does not permit limited liability of principals.

MANAGEMENT

Sole Proprietorship:

Individual operates business, not necessary to have formal designation of officers, no board of directors.

Partnership:

Partners operate business no formal designation of officers, no central management.

C and S Corporation:

Must designate officers – President, Secretary and Treasurer mandatory, Vice President discretionary. Must have a Board of Directors unless designated as a Maryland Close Corporation. President in charge of day to day operations of Corporation. Board of Directors elects officers. Shareholders elect Board of Directors.

LL Company:

Members operate business, no formal designation of officers, no central management.

L. Partnership/LLP:

Partners operate business, no formal designation of officers, no central management. Limited Partnership general partner manages the business but has general liability.

LENGTH OF EXISTENCE

Sole Proprietorship:

Perpetual.

Partnership:

Limited Existence. If partner leaves, becomes insolvent or dies Partnership terminates.

C and S Corporation:

Perpetual.

LL Company:

Limited Existence. If partner leaves, becomes insolvent or dies Company terminates.

L. Partnership/LLP:

Limited Existence. If partner leaves, becomes insolvent or dies Partnership terminates.

5.TRANSFERABILITY

Sole Proprietorship:

All interests transferable.

Partnership:

New persons may become members of partnership only upon consent of all partners.

C and S Corporation:

In general, stockholders freely transfer stock unless Restrictive Stock agreement is in existence.

LL Company:

New persons may become members only upon consent of all members.

L. Partnership/LLP:

Excepting general partner in Limited Partnership new persons may become members of partnership only upon consent of all partners.

6.TAX RAMIFICATIONS: MAY BE MOST IMPORTANT CONSIDERATION IN

FORMING ENTITY

Sole Proprietorship:

Tax attributes reflected in taxpayers’ return. Income taxed at individuals rate on Schedule C of 1040.

Partnership:

Pass through entity no partnership tax, but must file information return.

C and S Corporation:

C Corp., double taxation, taxed and Corp, and individual level for distributions made. S Corp., pass through entity, but basis limited to shareholders basis (contribution s to capital plus loans to corporation).

LL Company:

Pass through entity no partnership tax, but must file information return.

L Partnership/LLP:

Pass through entity no partnership tax, but must file information return.