Partnership, corporation and limited liability
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Which is better option of organization if you are opening an small business with a partner and both are investing the same amount of money, a partnership, a corporation or a limited liability company? Which will pay less taxes? Which is better protect against lawsuits or torts?
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Solution Summary
This solution explains which type of organization is optimal for a small business with a partner, where each partner invests the sale amount of money. The entity type that would pay the least amount of taxes and which offers better protection in lawsuits are also identified.
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A partnership and an LLC don't pay taxes itself - the income or loss from the business entity is passed onto each partner's Schedule K-1 at their respective percentage of ownership, and that partner then reports the income on his/her 1040. A ...
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