Partnership vs Corporation

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Partnership and Corporation Student’s Name Institution Affiliation Abstract Entrepreneurs have several choices to make when starting a business. One critical decision is the kind of business entity to form for the business. If there are two entrepreneurs starting a business, then they can choose either a partnership or a corporation. Choosing any of these entities has advantages and disadvantages. The best choice is influenced various factors such as taxation and state laws. A qualified attorney will be of help in making this decision. This article compares and contrasts a corporation and a partnership business entity in addition to the factors to consider when deciding on a business entity. Keywords: business, entity, partnership, corporation Introduction Different kinds of legal entity chosen for a business have legal consequences. A partnership and a corporation are two different ways of running a business; deciding on the business format is determined by factoring the one that provides a better ta treatment according to the owners’ needs. This is not the only determinant though it is crucial when considering long-term profitability. Contrasting tax treatments on corporations and partnerships In partnership, two or more people own the business. In this case, the legal entity is not separate from its owners and therefore it is not the partnership itself that pays taxes. According to the Internal Revenue Service (IRS), the profits earned by the business go directly to the income of the owners. The individual partners have the responsibility of paying self-employment taxes. On the other hand, a corporation is owned by shareholders and it’s separate from

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