What are the Differences Between a Partnership, Corporation, and a Limited Liability Company? 

There are entire books devoted to the differences between partnerships, corporations, limited liability companies, and other legal entity structures. However, for most businesses and individuals, the primary differences include:

• Liability Risk – General partners are exposed to personal liability, while limited partners, corporate shareholders, and LLC members enjoy limited liability. This means that – assuming the partnership, corporation, or LLC has been formed and managed properly – its owners will generally not be exposed to personal liability for the business’s debts.
• Income Tax – By default, partnerships, LLCs, and S-corporations are pass-through entities, meaning that the business’s income gets reported on its owners’ tax returns. In contrast, C-corporations are subject to corporate income tax (in addition to the personal income tax at the shareholder level). Which option is the most advantageous will depend upon a number of different factors that are unique to each individual business.
• Formalities and Flexibility – Generally speaking, partnerships and LLCs are subject to fewer formalities than corporations. LLCs also generally offer a greater level of flexibility when it comes to structuring ownership and control. However, corporations can offer greater flexibility with regard to shareholders’ rights.
• Transferability of Shares – If one of your goals is to build a business you can sell, this should factor into your choice of entity, as well.