What are the 3 main differences, between an S-Corporation and a General Partnership?
There are a lot of differences, between an S-Corp. and a General Partnership. This article gives a broad overview of the 3 main differences, between 2 ways to legally structure a business organization. Despite a few benefits, the dangers of operating a General Partnership should be more apparent.
Limited Liability.Generally, an S Corp. would provide its owners with limited personal liability. On the other hand, dependind on the juristiction, a General Partnership, would typically, not provide its owners with limited personal liability.
Tax Treatment.Although, both an S Corp. and a General Partnership are taxed as passthroughs (no double taxation) for Federal Taxation purposes, there are numerous of small, but pottentially consequential differences. The federal tax rules governing S Corps are usually contained in Subchapter S, while the corresponding tax rules for General Partnerships are contained in Subchapter K. In addition, the state and municipal/local tax rules for S Corp. and General Partnerships are all over the map, depending on the legal jurisdiction.
Number of owners permitted.S Corps can have only 1 owner, but General Partnerships typically require a minimum of 2 owners. As with the previous 2 differences mentioned above, the answer may vary substantially, depending on the legal juristiction.