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| Partnership V/S Corporation:My Passion Bookkeeping |
When launching a new venture or expanding an existing one, selecting the right business structure is more than a legal formality — it's a strategic decision that affects everything from taxes to liability to future growth.
What is a Partnership?
A partnership is a business owned and operated by two or more individuals who share profits, losses, and decision-making responsibilities. There are several types:
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General Partnership (GP): Equal liability and control.
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Limited Partnership (LP): Includes both general and limited partners (limited partners have restricted liability).
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Limited Liability Partnership (LLP): Offers liability protection for all partners.
Advantages:
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Simple to set up.
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Flexible management.
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Pass-through taxation (no corporate tax).
Disadvantages:
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Unlimited liability (except in LLPs).
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Potential for internal disputes.
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Can lack permanence if a partner exits.
What is a Corporation?
A corporation is a legal entity separate from its owners (shareholders). It can own property, enter contracts, sue and be sued.
Two common types:
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C Corporation: Subject to double taxation (corporate level and personal level).
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S Corporation: Pass-through taxation like partnerships (limited to 100 shareholders, all U.S. residents).
Advantages:
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Limited liability for owners.
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Easier to raise capital.
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Perpetual existence.
Disadvantages:
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More regulations and paperwork.
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Formal structure and governance.
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Possible double taxation (C corps).
Key Differences at a Glance
| Feature | Partnership | Corporation |
|---|---|---|
| Legal Status | Not a separate entity (except LLP) | Separate legal entity |
| Liability | Unlimited (unless LLP) | Limited |
| Taxation | Pass-through | C Corp: Double; S Corp: Pass-through |
| Setup Complexity | Low | High |
| Ownership Flexibility | High | Structured (shares, bylaws) |
Which One is Right for You?
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Choose a partnership if you value flexibility and simplicity, especially for small teams or professionals like consultants or lawyers.
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Opt for a corporation if you’re seeking growth, investment, or liability protection with a scalable, formal structure.
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| Partnership VS Corporation in One Image |
👉 Pro Tip: Always consult a tax advisor or CPA before deciding — each structure has distinct financial and legal implications depending on your goals and jurisdiction.
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