What is the advantage of incorporating over a partnership?
Each form has its advantages and disadvantages and which is best is determined by your specific situation. Here is a listing of some advantages and disadvantages of each. As always, before you make a decision, check with your attorney and/or CPA. Partnership Advantages: Synergy as a result of pooling partners’ different areas of expertise. The partnership does not pay Federal in-come taxes. An informational tax return (IRS Form 1065) must be filed which shows the pass-through of income/loss to each part-ner. Liability may be spread among the partners. Investment can come from the partners in the form of a loan which creates interest income for the partners and a business deduction for the partnership. Partnership Disadvantages: Formation and subsequent changes in structure are complex. Problems with partner(s) as the result of misunderstandings, different goals, etc., can weaken or destroy the partnership. Limited partners are liable for debt if they are active managers in the business
I hate to say this, but, ‘it depends.’ Each form has its advantages and disadvantages and which is best is determined by your specific situation. Here is a listing of some advantages and disadvantages of each. As always, before you make a decision, check with your attorney and/or CPA. It should also be noted that there are various types of partnerships and corporations. “The Small Business Start-Up Guide” discusses the differences in some detail.
