In Part 1 of this three-part series, we discussed the pros and cons of forming a sole proprietorship or a single-member LLC (taxed as a proprietorship).
In Part 2, we discussed what the three possible corporate forms of business have to offer.
In this new article, (Part 3), we’ll consider your options if you’re acquiring or starting a business with more than one owner.
Valuable information is waiting for you when you read my new article titled Tax Tips: Choosing the Right Entity for a Newly Acquired Business (Part 3).
Here’s just some of what you’ll learn:
The Multi-Member LLC Option.
- Why it combines the best legal and tax advantages of corporations and partnerships
- Why liability protection is a key benefit
- Why pass-through taxation helps you avoid “double taxation” problems
- Why it can’t provide you with as many tax-free fringe benefits as corporations
- Why you may have more exposure to self-employment taxes
The Limited Liability Partnership (LLP) Option.
- Why it’s a smart choice when there are several owners
- Why it’s an excellent choice for professional practices
- Why LLPs afford LLC-like liability under applicable state law
- Why an LLP doesn’t shield you from personal liability or professional errors and omissions
- Why it provides useful pass-through taxation (avoiding S corporation problems)
The General Partnership Option.
- Why it’s an appropriate choice when there are two or more co-owners who have a high degree of trust in each other
- Why partners benefit from pass-through taxation
- Why it can be used when LLC, LLP, limited partnerships, and S corporation status are unavailable or unworkable
- Why partners are personally liable for all debts and obligations of the partnership
- Why liability concerns can be managed by insurance
The Limited Partnership Option.
- Why a limited partnership owns its own assets and is liable for its debts
- Why it offers partners protection of their own assets
- Why you benefit from partnership treatment for income tax purposes
- Why the general partner is exposed to all recourse liabilities of the partnership
- Why limited partners can lose liability protection