Suc and Bill plan to open an accounting firm and expect to work full time in...

 

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Suc and Bill plan to open an accounting firm and expect to work full time in the firm. They expect to incur a small loss during their first ycar of operation and expect to be profitable after the first ycar. What are the tax law requirements for structuring the busincss as a partncrship or an S corporation? Which would you recommend and why? Suc and Bill could form partnerships under: General partnership - cach partner could manage the business but both would have unlimited liability and share in profits and losses. Limited partnerships - has at least onc gencral partner (manages) and one with limitcd liability but no authority to manage. Limited Liability Limited Partnership – not in all states and general partner has liability Limited Liability Company - some states do not allow personal scrvice firms to have LLC (offer LLLP instead). Every partner has limited liability and tax rules allow the chcck-the-box regulations to be treated as a partnership or taxed as a corporation Limited Liability Partnerships – has a default classification as a partnership as the LLC and can use the check-the-box regulations. S-Corporations – cligible cntity is treated under the rules of Subchapter S of the IRC. The LLC can clect to be treated as a corporation with the check-the-box or they can file a partnership tax return where partnership tax rules apply. Suc and Bill plan to open an accounting firm and expect to work full time in the firm. They expect to incur a small loss during their first ycar of operation and expect to be profitable after the first ycar. What are the tax law requirements for structuring the busincss as a partncrship or an S corporation? Which would you recommend and why? Suc and Bill could form partnerships under: General partnership - cach partner could manage the business but both would have unlimited liability and share in profits and losses. Limited partnerships - has at least onc gencral partner (manages) and one with limitcd liability but no authority to manage. Limited Liability Limited Partnership – not in all states and general partner has liability Limited Liability Company - some states do not allow personal scrvice firms to have LLC (offer LLLP instead). Every partner has limited liability and tax rules allow the chcck-the-box regulations to be treated as a partnership or taxed as a corporation Limited Liability Partnerships – has a default classification as a partnership as the LLC and can use the check-the-box regulations. S-Corporations – cligible cntity is treated under the rules of Subchapter S of the IRC. The LLC can clect to be treated as a corporation with the check-the-box or they can file a partnership tax return where partnership tax rules apply.

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