Limited Partnerships involve at least one general partner personally liable for the company and responsible for its debts. Limited partners are usually passive investors. They are only liable for the amount of their investment in the business, but may receive bonuses, dividends, profit-sharing or other payments. Subchapter S Corporations allow small businesses to insulate shareholders from many corporate debts and liabilities. However, S Corporations are limited in the number and types of shareholders they may have.
Profits pass directly to shareholders without any business income taxes.
Subchapter C Corporations include most large, publicly held businesses. Shareholders are protected from most corporate debts and liabilities. Profits are distributed to shareholders as dividends, and therefore are subject to double taxation. C Corporations must pay business income taxes, and shareholders must pay personal income taxes on dividends. The type of business organization should be chosen carefully and thoughtfully.