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COMPARISON OF ENTITY STRUCTURES pt.1

Entity Type Liability for Debts of Entity Participation in Management Transferability of Interests Term

Limited Partnership General Partner liable. Limited partners protected unless participate in management. Participation by limited partners generally restricted to preserve limited liability. Restrictions imposed by state law, by securities laws, and generally by the partnership agreement; generally, partner may assign right to receive distributions/allocations, but assignee becomes partner only if all partners consent. Partnership Agreement specifies terms.

Limited Liability Company All members protected. No restrictions. Restrictions imposed by state laws, securities laws, and LLC Regulations, if any; generally, member may assign right to receive distributions/allocations, but assignee becomes member only if all members consent. Varies, often not to exceed 30 years; can reconstitute.

S Corporation All shareholder protected. No restrictions. Restrictions are imposed by securities laws, and by a shareholder's agreement, if any. Perpetual.

C Corporation All shareholders protected. No restrictions. Restrictions are imposed by securities laws, and by a shareholder's agreement, if any. Also, shareholders usually agree not to make transfers that would terminate S election. Perpetual.

Statutory Trust All beneficiaries. Trustee manages and beneficiary may be trustee. Restrictions are imposed by securities laws, and by a shareholder's agreement, if any. Perpetual.

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COMPARISON OF ENTITY STRUCTURES pt.1
Entity Type	Liability for Debts of Entity	Participation in Management	Transferability of Interests	Term
Limited Partnership	General Partner liable. Limited partners protected unless participate in management.	Participation by limited partners generally restricted to preserve limited liability.	Restrictions imposed by state law, by securities laws, and generally by the partnership agreement; generally, partner may assign right to receive distributions/allocations, but assignee becomes partner only if all partners consent.	Partnership Agreement specifies terms.
Limited Liability Company	All members protected.	No restrictions.	Restrictions imposed by state laws, securities laws, and LLC Regulations, if any; generally, member may assign right to receive distributions/allocations, but assignee becomes member only if all members consent.	Varies, often not to exceed 30 years; can reconstitute.
S Corporation	All shareholder protected.	No restrictions.	Restrictions are imposed by securities laws, and by a shareholder's agreement, if any.	Perpetual.
C Corporation	All shareholders protected.	No restrictions.	Restrictions are imposed by securities laws, and by a shareholder's agreement, if any. Also, shareholders usually agree not to make transfers that would terminate S election.	Perpetual.
Statutory Trust	All beneficiaries.	Trustee manages and beneficiary may be trustee.	Restrictions are imposed by securities laws, and by a shareholder's agreement, if any.	Perpetual.

COMPARISON OF ENTITY STRUCTURES pt.2
Entity Type	Will Entity be Dissolved Upon Death, Retirement, Resignation, Expulsion, Bankruptcy or Dissolution of Participant?	Are Ownership Interests Securities?	Subject to Federal Income Tax at Entity Level?
Limited Partnership	Yes, if general partner is affected; but can be reconstituted by remaining general partner or by agreement of all remaining partners.	Limited partners' interest s are securities.	No, if lacks two of four corporate characteristics: (i) limited liability; (i) free transferability of interest; (iii) continuity of life, and (iv) centralized management.
Limited Liability Company	Yes, unless Regulations provide otherwise or remaining members unanimously consent to continue business.	Possibly not, if all members have management rights.	No, if lacks free transferability of interests and continuity of life. Occasionally, a LLC may lack centralized management.
S Corporation	No	Shares are securities.	No, however, any shareholder may cause loss of tax status.
C Corporation	No.	Shares are securities.	Yes.
Statutory Trust	No.	Yes.	Depends on classification.

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COMPARISON OF ENTITY STRUCTURES pt.3

Entity Type Qualifications Number of Owners Form of Permissible Interest Will Contribution of Appreciated Property be Taxable?

Limited Partnership A limited partnership generally needs an individual general partner or a corporate general partner with substantial assets. At least 2; no upper limits. In most states, cash, property, services rendered, promissory notes, or obligation to transfer property. No, regardless of control by partner, unless recharacterized as sale or partner has net reduction in liabilities in excess of tax basis in contributed property.

Limited Liability Company No restrictions. At least 2 to be considered a partnership for tax purposes; no upper limits. In most states, cash, property, services rendered, promissory notes, or obligation to transfer property. No, regardless of control by member.

S Corporation Various eligibility requirements, including a restriction on the number of shareholders and on the ownership of subsidiaries. No lower limits; upper limit is 35. Any tangible or intangible benefit to the corporation, including cash, promissory notes, services rendered, contracts for future services, or other securities of the corporation. Yes, except if controls corporation (80% voting power) immediately after transfer.

C Corporation No restrictions. No lower or upper limits. Any tangible or intangible benefit to the corporation, including cash, promissory notes, services rendered, contracts for future services, or other securities of the corporation. Yes, except if controls corporation (80% voting power) immediately after transfer.

Statutory Trust None. No restrictions. Any tangible or intangible benefit to the corporation, including cash, promissory notes, services rendered, contracts for future services, or other securities of the corporation. Depends on classification.

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COMPARISON OF ENTITY STRUCTURES pt.4

Entity Type Managing Body Officers Rules for Management of Entity Must Formalities be Observed to Preserved Limited Liability?

Limited Partnership General partner. Limited partners may not participate in management. No. Limited Partnership Agreement. No.

Limited Liability Company Managers, unless Regulations reserve to members. All members can participate in management. Yes, if designated by managers. Regulations. Unclear.

S Corporation Board of Directors. Yes, if designated by managers. Bylaws. Yes, unless corporation adopts close corporation status.

C Corporation Board of Directors. Yes, must have at least president and secretary. Bylaws. Yes, unless corporation adopts close corporation status.

Statutory Trust Trustee. Yes. Trust Agreement. Yes./td>

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COMPARISON OF ENTITY STRUCTURES pt.3
Entity Type	Qualifications	Number of Owners	Form of Permissible Interest	Will Contribution of Appreciated Property be Taxable?
Limited Partnership	A limited partnership generally needs an individual general partner or a corporate general partner with substantial assets.	At least 2; no upper limits.	In most states, cash, property, services rendered, promissory notes, or obligation to transfer property.	No, regardless of control by partner, unless recharacterized as sale or partner has net reduction in liabilities in excess of tax basis in contributed property.
Limited Liability Company	No restrictions.	At least 2 to be considered a partnership for tax purposes; no upper limits.	In most states, cash, property, services rendered, promissory notes, or obligation to transfer property.	No, regardless of control by member.
S Corporation	Various eligibility requirements, including a restriction on the number of shareholders and on the ownership of subsidiaries.	No lower limits; upper limit is 35.	Any tangible or intangible benefit to the corporation, including cash, promissory notes, services rendered, contracts for future services, or other securities of the corporation.	Yes, except if controls corporation (80% voting power) immediately after transfer.
C Corporation	No restrictions.	No lower or upper limits.	Any tangible or intangible benefit to the corporation, including cash, promissory notes, services rendered, contracts for future services, or other securities of the corporation.	Yes, except if controls corporation (80% voting power) immediately after transfer.
Statutory Trust	None.	No restrictions.	Any tangible or intangible benefit to the corporation, including cash, promissory notes, services rendered, contracts for future services, or other securities of the corporation.	Depends on classification.

COMPARISON OF ENTITY STRUCTURES pt.4
Entity Type	Managing Body	Officers	Rules for Management of Entity	Must Formalities be Observed to Preserved Limited Liability?
Limited Partnership	General partner. Limited partners may not participate in management.	No.	Limited Partnership Agreement.	No.
Limited Liability Company	Managers, unless Regulations reserve to members. All members can participate in management.	Yes, if designated by managers.	Regulations.	Unclear.
S Corporation	Board of Directors.	Yes, if designated by managers.	Bylaws.	Yes, unless corporation adopts close corporation status.
C Corporation	Board of Directors.	Yes, must have at least president and secretary.	Bylaws.	Yes, unless corporation adopts close corporation status.
Statutory Trust	Trustee.	Yes.	Trust Agreement.	Yes./td>

COMPARISON OF ENTITY STRUCTURES pt.5

Entity Type Types of Owners Filing Required Entity Name Organization Costs

Limited Partnership No restrictions. Certificate of Limited Partnership. Must contain "Limited Partnership", "Limited", "L.P.", or "Ltd". Varies.

Limited Liability Company No restrictions. Articles of Organization. Usually must contain "Limited", "Ltd.", "LC", or "LLC". Varies.

S Corporation Ownership is limited to U.S. residents and citizens and to certain U.S. trusts (no corporations, nonresident aliens, partnerships, certain trust, and pension plans). Articles of Incorporation. Must contain "Corporation", "Company", "Incorporated", or abbreviation thereof. Varies.

C Corporation No restrictions. Articles of Incorporation. Must contain "Corporation", "Company", "Incorporated", or abbreviation thereof. Varies.

Statutory Trust No restrictions. Certifcates of Trust. No requirement. Varies.

COMPARISON OF ENTITY STRUCTURES pt.5
Entity Type	Types of Owners	Filing Required	Entity Name	Organization Costs
Limited Partnership	No restrictions.	Certificate of Limited Partnership.	Must contain "Limited Partnership", "Limited", "L.P.", or "Ltd".	Varies.
Limited Liability Company	No restrictions.	Articles of Organization.	Usually must contain "Limited", "Ltd.", "LC", or "LLC".	Varies.
S Corporation	Ownership is limited to U.S. residents and citizens and to certain U.S. trusts (no corporations, nonresident aliens, partnerships, certain trust, and pension plans).	Articles of Incorporation.	Must contain "Corporation", "Company", "Incorporated", or abbreviation thereof.	Varies.
C Corporation	No restrictions.	Articles of Incorporation.	Must contain "Corporation", "Company", "Incorporated", or abbreviation thereof.	Varies.
Statutory Trust	No restrictions.	Certifcates of Trust.	No requirement.	Varies.

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COMPARISON OF ENTITY STRUCTURES pt.6

Entity Type Ability to do Business in other States Limited Liability of Participants Recognized in Other States Levels of Income Tax

Limited Partnership Yes. Yes. Partner level only.

Limited Liability Company Unclear in those states that do not have an LLC statute. Unclear in those states that do not have an LLC statute. Member level only.

S Corporation Yes. Yes. Generally, only shareholder level. However, former C corporations may be subject to tax. In addition, some states will tax S corporations.

C Corporation Yes. Yes. Corporate and shareholder level.

Statutory Trust Yes. Yes. Beneficiary level.

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COMPARISON OF ENTITY STRUCTURES pt.6
Entity Type	Ability to do Business in other States	Limited Liability of Participants Recognized in Other States	Levels of Income Tax
Limited Partnership	Yes.	Yes.	Partner level only.
Limited Liability Company	Unclear in those states that do not have an LLC statute.	Unclear in those states that do not have an LLC statute.	Member level only.
S Corporation	Yes.	Yes.	Generally, only shareholder level. However, former C corporations may be subject to tax. In addition, some states will tax S corporations.
C Corporation	Yes.	Yes.	Corporate and shareholder level.
Statutory Trust	Yes.	Yes.	Beneficiary level.

COMPARISON OF ENTITY STRUCTURES pt.7

Entity Type Formation Special Allocation of Income and Loss Between Participants Deductibility of Losses Attributable to Entity Debt At-Risk Limitations

Limited Partnership Nontaxable, unless disguised sale or the partner is relieved from debt. Yes. General partners only may deduct partnership losses to extent of basis, unless limited partnership assume liability. Applicable.

Limited Liability Company Nontaxable, unless disguised sale or the partner is relieved from debt. Yes. Members may deduct the LLC's losses only to the extent of their tax basis on their LLC interest which includes their allocable share of LLC debt. Applicable.

S Corporation Taxable; however, if the transferrors meet the 80% control test of IRC, Section 351, nontaxable except to the extent of debt relief. No, all allocations are pro rata since only one class of stock is permitted. Shareholders may deduct the corporation's losses only to the extent of their tax basis in their stock which does not include any portion of the corporation's debt. Applicable.

C Corporation Taxable; however, if the transferrors meet the 80% control test of IRC, Section 351, nontaxable except to the extent of debt relief. Preferences in distribution can be given to certain classes/series of stock. Shareholders may not deduct any of the corporation's losses. Applicable, if closely held.

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COMPARISON OF ENTITY STRUCTURES pt.7
Entity Type	Formation	Special Allocation of Income and Loss Between Participants	Deductibility of Losses Attributable to Entity Debt	At-Risk Limitations
Limited Partnership	Nontaxable, unless disguised sale or the partner is relieved from debt.	Yes.	General partners only may deduct partnership losses to extent of basis, unless limited partnership assume liability.	Applicable.
Limited Liability Company	Nontaxable, unless disguised sale or the partner is relieved from debt.	Yes.	Members may deduct the LLC's losses only to the extent of their tax basis on their LLC interest which includes their allocable share of LLC debt.	Applicable.
S Corporation	Taxable; however, if the transferrors meet the 80% control test of IRC, Section 351, nontaxable except to the extent of debt relief.	No, all allocations are pro rata since only one class of stock is permitted.	Shareholders may deduct the corporation's losses only to the extent of their tax basis in their stock which does not include any portion of the corporation's debt.	Applicable.
C Corporation	Taxable; however, if the transferrors meet the 80% control test of IRC, Section 351, nontaxable except to the extent of debt relief.	Preferences in distribution can be given to certain classes/series of stock.	Shareholders may not deduct any of the corporation's losses.	Applicable, if closely held.

COMPARISON OF ENTITY STRUCTURES pt.8

Entity Type Passive Activity Limitations Fiscal Year Cash Distributions Liquidations

Limited Partnership Limited partner can be active under only 3 of 7 test (i.e., essentially, the limited partner must participate in the activity for 500 hours). Generally Calendar. Nontaxable to the extent of a partner's tax basis. Nontaxable to the extent of a partners's tax basis.

Limited Liability Company It is not clear whether members or managers can qualify under all 7 or only 3 tests. Generally Calendar. Nontaxable to the extent of a member's tax basis. Nontaxable to the extent of the member's tax basis.

S Corporation All 7 test apply. Generally Calendar. Generally nontaxable to the extent of the shareholders' tax basis. Generally nontaxable at corporate level and taxable at shareholder level through flow-through of corporate tax items.

C Corporation Not applicable. No restrictions. Taxable as dividends to the extent of the corporation's earnings and profits and then nontaxable to the extent of the shareholder's tax basis. Taxable to both corporation and shareholders.

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COMPARISON OF ENTITY STRUCTURES pt.8
Entity Type	Passive Activity Limitations	Fiscal Year	Cash Distributions	Liquidations
Limited Partnership	Limited partner can be active under only 3 of 7 test (i.e., essentially, the limited partner must participate in the activity for 500 hours).	Generally Calendar.	Nontaxable to the extent of a partner's tax basis.	Nontaxable to the extent of a partners's tax basis.
Limited Liability Company	It is not clear whether members or managers can qualify under all 7 or only 3 tests.	Generally Calendar.	Nontaxable to the extent of a member's tax basis.	Nontaxable to the extent of the member's tax basis.
S Corporation	All 7 test apply.	Generally Calendar.	Generally nontaxable to the extent of the shareholders' tax basis.	Generally nontaxable at corporate level and taxable at shareholder level through flow-through of corporate tax items.
C Corporation	Not applicable.	No restrictions.	Taxable as dividends to the extent of the corporation's earnings and profits and then nontaxable to the extent of the shareholder's tax basis.	Taxable to both corporation and shareholders.