What are the benefits/downfalls of being a corporation vs partnership vs sole proprietorship for tax and...

80.2K

Verified Solution

Question

Accounting

What are the benefits/downfalls of being a corporation vspartnership vs sole proprietorship for tax and legal purposes?
If you create an LLC do you default to a partnership orcorporation for tax purposes? Can an LLC be both?
Do corporations and partnerships both pay tax?

Answer & Explanation Solved by verified expert

4.0 Ratings (568 Votes)

1Sole Proprietorship A sole proprietorship is a business owned by a single individual This person collects all the profit from the business and is liable for its debt Advantages A sole proprietorship is the simplest and least expensive business to start and operate Because the owner and the business are one and the same all of the income and expenses go straight to the owner The owner then reports those on their personal income tax forms Disadvantages In a sole proprietorship theres legally no difference between the business and the owner Therefore all of the owners private possessions are at risk if they are needed to pay the businesss debts 2Partnership A partnership is a business wherein two or more individuals share the management profit and liability for the companys debts Advantages Like a sole proprietorship a partnership is simple to set up and run Disadvantages See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member