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For more information, contact City of South Bend Business License Administrator, Michelle Adams | madams@southbendin.gov | 574.235.5912 | 31 RESOURCE GUIDE INFORMAL ENTITIES SOLE PROPRIETORSHIP The most basic type of business to establish. The sole owner assumes complete responsibility for all liabilities and debts of the business. The personal tax rate is usually lower than the corporate tax rate. Sole proprietorships are generally utilized in situations where an individual is looking for the easiest way to get their business off the ground. As soon as one starts doing business, a sole proprietorship exists, subject to licensing and zoning requirements. GENERAL PARTNERSHIP Two or more individuals as co-owners of a for profit business. All partners are responsible for the liabilities and debts of the partnership. Profits are taxed as income to the partners based on their ownership percentage. FORMAL ENTITIES LIMITED LIABILITY CO. A limited liability co. is designed to provide the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership. A LLC has members rather than shareholders. A member enjoys protections from the liabilities and debts of the LLC. CORPORATION A corporation is complex and generally suggested for larger established companies with multiple employees. The corporation assumes all liabilities and debts. It is owned by shareholders and their ownership is represented by shares of stock. A shareholder enjoys protection from the corporation’s debts and liabilities. S-CORPORATION An S-corporation is similar to a C-corporation, but you are taxed only on the personal level. The S-corporation’s special tax status eliminates the double taxation that can occur with a DEFINITIONS/GLOSSARY