Partnership versus Corporation


Assignment 1: Partnership vs. Corporation Kimberly Aaron Professor: Margaret Parrish Acc 317 Advanced Federal a!ation "ecember #$ %&13

Partnership versus Corporation 2 This report will explain the current advantages and disadvantages of Partnership and Corporation to better understand which choice is better for you and your company Compare and contrast the advantages and disadvantages inherent in electing to become a partnership and a corporation. 'ndicate (ey aspects in )hich the res*lting choice is li(ely to impact ta! obligations. Partnership is a legal form of b*siness )ith t)o or more o)ners.ole proprietorship )hich is a b*siness that is o)ned$ and *s*ally managed by one person. Partnership and Corporation are different in many )ays and depending on ho) yo* )ant yo*r company str*ct*red ma(es the different on )hich option yo* )ill choose to set *p yo*r company. ' )o*ld have to say that Partnership and corporation has is the most common form. Partnerships are *s*ally easier to set*p than beca*se o)ners +*st split the profit and file on their personal ta!es a Corporations have to file separately beca*se a corporation is a separate entity and its base on the shares the company holds. Corporation is a legal entity )ith a*thority to act and have liability separate from its o)ners.s advantages and disadvantages for e!ample a . here are three ma+or forms of b*siness o)nership and they incl*de: .

1ne of the benefits of become a partnership is to avoid the do*ble ta!ation iss*e. 1n the other hand )e have the corporation.s a partnership )ith one or more general partners and one or more limited partners$ and last )e have the Master /imited partnership and this partnership loo( m*ch li(e a corporation beca*se it acts li(e a corporation and is traded on a stoc( e!change b*t is ta!ed li(e a partnership and avoid those corporate income ta!. Prepare a response to the ob+ection that this election )as the best choice. 4*stify to yo*r team )hy yo* elected to become a partnership in an effort to minimi5e ta! liability.Partnership versus Corporation partnership has a fe) different types of partnership )hich is the 3 /imited Partnership )hich is a partnership in )hich all o)ners share in operating the b*siness and ass*ming the liability for the b*siness debts and then )e have the /imited partnership and it. Partnership is advantage beca*se all profits of partners are ta!ed as personal income of the o)ners$ t)o or more people pool their money and credit. he disadvantages of the partnerships is that sharing profits can ca*se conflicts$ 0o* are also liable for yo*r partners mista(es as )ell as yo*r o)n and both are responsible fore the debt no mater )hich partnership ca*sed the debt. 'magine that yo* are a Partner at 2al( 3pright Company. 1)ners can at any time decide to in+ect more cash into the b*siness from their personal f*nds or nothing stopping them from moving monies$ property and other goods in and o*t of the service of the partnership b*t$ )ith a .

1)ners +*st split the profit and 4 file this income on their personal income ta!. 2e are considered 6pass thro*gh7 )hich means all of the profits and losses are passed thro*gh to the o)ners. 4*stify to yo*r management team )hy yo* elected to become a corporation. he reason ' elected to become a corporation is beca*se of the advantages of the /imited /iability$ 1)nership easily transfers$ Perpet*al e!istence$ a! advantages and . "etermine )hether becoming a corporation )as a )ise choice as a potential strategy to minimi5e ta! liability as a res*lt. 'magine that yo* are the Chief Financial 1fficer 8CF19 at :o More 'ce$ 'nc.aising capital. ' elected to become a partnership beca*se of the benefits that comes )ith being a partnership than a corporation$ beca*se it is a simplified approach to reporting ta!es. ' )o*ld not be liable for the debt and obligations of the corporation$ ' can transfer the company as easy as transferring the shares and there are ta! advantages )hich are the small b*siness ded*ctions that )o*ld be *sef*l come ta! time. .Partnership versus Corporation corporation all monies m*st be acco*nted for caref*lly and transfer of physical property m*st be legally recorded. Provide s*pport for yo*r rationale. hese are some of the reasons that ' elected to become a corporation.

tax purposes. here is also the possibility of do*ble ta!ation b*t over all it )as a )ise choice beca*se it is easier to raise capital for a corporation$ lenders are more )illing to lend then to a partnership.t pay o*r debt the creditors have not right to claim payment from the shareholders. tax law governs the classification of a form of foreign business organization for U. For e!ample if and anytime )e can.S. Corporation is re<*ired to (eep 5 records of its shareholders$ directors and officers and any changes.Partnership versus Corporation here are some advantages and disadvantages of a corporation: A corporation can be s*b+ect to greater reg*lation that can add to the cost of doing b*siness and also the cost of corporation can be greater than for a sole proprietorship or a partnership. 'ndicate ho) this election change$ once complete$ may either generate a ta! liability or be a benefit. The check the box regulation under IRC section !"# are generall$ effective %anuar$ "# "&& . Provide e!amples of circ*mstance *nder )hich changing the e!isting election )o*ld be appropriate.s e!isting election. Provide s*pport for yo*r rationale. Analy5e the steps that the leadership in a partnership or a corporation m*st ta(e in order to change the entity. The status election is not available to entities that are incorporated under state law or to entities that that are . hese )ere the reason ' choose the corporation over the partnership. 6The U.S. There are several step to take to under the check'the'box regulations.

**C-s are not treated as being incorporated under state law# so the$ default to either partnership or .com )))..Partnership versus Corporation re(uired to be taxed as corporations under )ederal *aw +e.=>/a) ?offman$ 2illiams ?.R/ status. .$ "avid M.1 References ))).com ))).B: .% A..1.# certain publicl$ traded partnerships.o*th> 2estern$ %&13 Print. Maloney$ 2illiam A . 0o*ng.nolo.aabe$ and 4ames c. @ol.irs.o*th>)ester Federal a!ation %&1. 0lthough and **C does not t$picall$ pa$ )ederal income taxes. . 37th ed.