S Corporation vs. Partnership: Key Tax Implications, Similarities, and Differences

Although a partnership and an S corporation share many of the same characteristics, there are also distinct differences between these entities that will affect each shareholder’s tax burden, protection of personal assets, and control over policies. As counsel, you need to be well versed in the treatment of taxes and insulation of liability under each of these business structures to help your clients decide which best suits their ownership, management, and operational goals. Every organization is unique. Many quantitative and qualitative factors must be considered when advising clients whether a formation of a partnership or S corporation will be most beneficial to achieve organizational objectives. Our expert panel will walk you through the most important questions that need to be asked when making this type of entity decision, as well as identify the key differences between the taxation of partnerships and S corporations, including: - Limits as to the number and nature of owners - The ability to reward employees with tax-free equity interests - The taxability of property distributions - Self-employment tax considerations - Loss limitations and the inclusion of liabilities in basis - Sale of an interest in the business