Partnership or incorporation? what is different?

Question

please explain to me the difference between partnership and incorporation,the advantages and disadvantages.
Thanks,

Answer 1

The LLC is a new hybrid form of doing business that combines characteristics of the corporate structure and the partnership structure. It is a separate entity like a corporation and therefore carries liability protection for all of its' members, but (if structured properly) is taxed like a partnership which has the benefit of flow through taxation. The corporation is a separate entity and therefore carries with it limited liability protection for its owners or stockholders. It has perpetual life and is a tax paying entity. Double taxation is a potential negative feature as earnings are taxed at the entity level and then taxed again when distributed to the stockholders as dividends.

The key issue to determine whether the LLC qualifies for partnership tax treatment is whether or not it is too much like a corporation. Fortunately, there is a test and it boils down to four basic characteristics that corporations have. The LLC can only have two and still retain its partnership tax status. They are limited liability, continuity of life, centralized management and, free transferability of interests. Selecting the two that your LLC will have and making sure you don't have three is the tricky part and where the importance of proper drafting of the operating agreement comes in. The IRS has approved a simplified process called "Check the Box", wherein the LLC organizer can just elect what tax treatment is preferred. Not all states have adopted "Check the Box" and currently the safest way to organize is to comply with the original guidelines with respect to corporate characteristics.

The Subchapter S corporation is formed by making a special IRS election. When properly made and maintained this election allows the flow-through taxation treatment similar to that which partnerships and LLCs enjoy. The problems arise however in compliance with the stringent rules necessary to maintain the election and S status. These qualification requirements necessitate administrative and cost burdens that LLCs do not have and it is actually fairly easily to inadvertently lose S status by failure to comply with all of the rules. This can lead to disastrous tax consequences.

Answer 2

I think "what the heck" has it mostly right. Much of these qualities can be personalized by state, and there are sub-categories, such as:

Limited Liability Partnership, Limited Liability Corporation, Sub-S, Limited Liability Limited Partnership, and Professional Corporation.

-j.

Answer 3

general partnership - flow through taxation, general partner runs the business, limited partners invest the money. you're personally liable if you're sued. in a corporation, that is a seperate legal entity that can sue and be sued. corp is taxed at the corp level and the shareholder level (unless it's an s corp, then just at shareholder level). Managed by the board of directors. your personal assets are safer if you do business under a corporation

Answer 4

Be careful! There are different types of partnerships and different kinds of corporations.

There are many different types of "differences" too.... legal liability of the individuals, taxation, state and federal fees and filing of paperwork.

It also depends on which state you're talking about too.

Go to www.nolo.com for good info
Good luck

Answer 5

The differences are mainly a matter of liability for the owners and tax treatment - although other details, like the corporate charter, can differ as well.

Here's a site with a quick comparison/primer:

http://www.llcweb.com/struc.htm

Answer 6

I have a corporation i own my own business and do not have any partners or silent partners, i get all the perks,
plus with a corp you can take distributions from the company and only pay taxes once on the money

Answer 7

Was wondering the same thing

Answer 8

I think so