This is sort of a spinoff from my previous post…im trying to figure out which would be more advatagous to my REI business partner and I; a partnership or LLC…i know there are several tax advantages with LLC’s but what about partnerships. Do they have have tax benefits at all and which one would be more appropiate for my business partner an I.
Take a trip over to Legalzoom. they outline exactly what each structure is and the advantages and disadvantages of both. It is a good read.
Just don’t use them to actually do the work.
neither will present any tax savings over the other. just a different method of getting there.
LLC has the advantage that it can be taxed as a corporation, which may provide some tax savings if you do not intend to pull money out of the entity. If the entity makes enough to pay you a salary, you may realize some tax savings by further taxing the LLC as an S-corp. However, your specific circumstances will dictate which will benefit you, if at all.
A limited partnership usually requires a general partner, which will absorb 100% of the liability. Usually you use a corporation as GP, but then this adds another entity and level of complexity. Some states have limited liability limited partnerships, where all the partners have limited liability…in effect making it an LLC without the flexibility in taxation.