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Partnership vs. Corporations

In: Business and Management

Submitted By sweetboos
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Partnerships vs. Corporations
Tracy Kamke
Professor Edward Hastings
ACC317
March 9, 2014

A partnership is an association owned by two or more people to carry a business or trade with each parnter contributing money, property, labor, or skill and all partners expecting to share the profits and losses. A corporation is a separate entity that has its own rights, privileges, and liabilities separate from its members. Whether you choose to be a partnership or corporation, depends on how much your federal income tax will be. There are different types of corporations and many different partnership types. There are two different types of corporations. You have the C Corporation, which has the toughest tax bracket; you are subject to double taxation. The first tax is on the company's net earnings, and the second tax is that each shareholder must pay tax on his or her dividend. A C Corporation can reduce or eliminate its federal income tax liability by distributing its income to the shareholders who perform services for the company (Battersby, 2008, p.10). The other is the S Corporation which resembles the partnership and report entities like partnerships. Partnerships are not taxable entities and are not subjected to federal income tax. In a partnership, you are required to file a Form 1065 to report the results of the partnership's business activities. There is a general partnership which is two or more partners that participate in management of the entity and no limited partners. A limited partnership is having both general and limited partners. "Partnerships are tax-driven and tax-affected entities" (Alfonsi, 2010, p.26). Partnerships can be flexible on how they structure their operations and between the owners. The flexibility can be with the gain or loss, deductions, amount being distributed, and allocations of income (Alfonsi,...

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