The Choice of Business Entity: Corporate, Pass-Through, and Disregarded Entities

Abstract

This technical note focuses on common business entities: sole proprietorships, general partnerships (GPs), limited partnerships (LPs), limited liability partnerships (LLPs), limited liability companies (LLCs), S corporations, and C corporations and offers insights into the basic factors to consider when choosing one of these entities. The Appendix provides an overview of other important entities in the federal tax code: real-estate investment trusts (REITs), regulated investment companies (e.g., mutual funds), and publicly traded partnerships (PTPs). Excerpt UVA-C-2293 Rev. Sept. 1, 2016 The Choice of Business Entity: Corporate, Pass-Through, and Disregarded Entities When starting a business, there are many important choices that must be made, from the hiring of key personnel to the choice of a business model. One choice that can have far-reaching effects on the success of any business is the legal form through which it will operate and interact with the rest of the business community. Not only does the choice of a legal form have important federal income tax implications, but it can also affect a business owner's administrative workload, the manner in which he runs his day-to-day operations, his ability to transfer his ownership interest, and how he can compensate his employees. This technical note focuses on common business entities: sole proprietorships, general partnerships (GPs), limited partnerships (LPs), limited liability partnerships (LLPs), limited liability companies (LLCs), S corporations, and Ccorporations and offers insights into the basic factors to consider when choosing one of these entities. Appendix 1 provides an overview of other important entities in the federal tax code: real-estate investment trusts (REITs), regulated investment companies (e.g., mutual funds), and publicly traded partnerships (PTPs). State Law Entities . . .