Disadvantages and Tax Consequences of Partnerships Essay

Disadvantages and Tax Consequences of Partnerships - Essay ExampleThis paper discusses thata partnership has some(a) tax benefits in comparison to other different profession entities. Thus, for example, loss or income distribution or allocation should be proportional to the ownership post of the stakeholders of a given corporation, whereas for a partnership, it may allocate cash flow or income amongst the partners that suits them best. In addition, a partnership allows resource pooling, needs basic selection requirements, avoids double taxation like that of corporate profits together with being reasonably easy to suspend operations. A partnership can therefore run off tax-free, but a corporation is unremarkably taxed at the entity point whenever it liquidates. The other tax break for a limited partnership concerns limited partners. Normally, general partners usually pay self-employment taxes since they are involved actively in the daily running of their business operations.This essay stresses thatself-employment taxation comprises of Medicare and Social Security taxes put together and normally accounts for 15.3% of the total income of a partner as of 2013.It is important to note that a limited partner who does not take part in the operation of the business is not entitled to self-employment taxation.A conventional partnership usually has authority distributed equally between the partners, and thus, no hierarchy of authority exists.Inflexibility is particularly hateful when the partners have existing disagreements amongst themselves.