Partnerships and corporations are two forms of business organizations. A partnership is an association of two or more persons for profit. Unless it is a limited partnership, it need not be established in writing. A corporation is a legal entity created in accordance with state law. Incorporation establishes the business as a distinct financial entity. Owners of a corporation are not personally liable for the debts of the business. Partnerships are less complicated to set up than corporations and may be more favorable to smaller businesses for tax purposes. However, each partner can be held personally responsible for the debts in a partnership, and in the event that one of the partners quits, dies, or declares bankruptcy, the partnership is dissolved. In deciding whether to incorporate, one should study the following: Who will control the affairs of the entity? How much financial risk is involved? What is the potential for growth? Does incorporation provide for a favorable tax effect? For more information regarding partnerships and corporations, contact a qualified attorney.
