 |
 |
 |
 |
 |
 |
Articles
|
INDIVIDUAL OWNERSHIP | PARTNERSHIP | LIMITED LIABILITY COMPANY ("LLC") | S CORPORATION | C CORPORATION | ||||||
| Limited Liability | NO | Limited partners have protection from the partnership's debt's unless provided otherwise. | All members have protection from the LLC's debts unless provided otherwise. | All shareholders | All shareholders | |||||
| Participation in Management | YES | Participation by limited partners generally must be restricted to preserve limited liability | No restrictions. | No restrictions | No restrictions | |||||
| Transferability of Interests | YES | Restrictions are imposed by state law, by securities laws and generally by the partnership agreement. | Restrictions are imposed by state laws, securities laws and LLC Regulations, if any. | Restrictions are imposed by securities laws and by a shareholders agreements, if any. | Restrictions are imposed by securities laws and by a shareholders agreements, if any. | |||||
| Continuity of Life | N/A | Generally, no | Yes | Yes | Yes | |||||
| Qualification | N/A | A limited partnership generally needs an individual general partner or a corporate general partner with substantial assets. | No restrictions | There are various eligibility requirements including a restriction on the number and type of shareholders and on the ownership of subsidiaries. | No restrictions | |||||
| Number of Owners | N/A | At least 2 | No restrictions, but at least 2 to be considered a partnership for tax purposes. | 1 to 75 | No restrictions | |||||
| Types of Owner | N/A | Any | Any | Ownership is limited to U.S. residents and citizens and to certain U.S. trusts. | Any | |||||
| Classes of Ownership Interests | N/A | Multiple classes are permitted | Multiple classes are permitted | One. However, there can be Differences in voting rights | Multiple classes are Permitted. | |||||
| Organization Costs | N/A | The filing fee in Texas for a Texas limited partnership is $750. | The filing fee in Texas for a Texas LLC is $200. | The filing fee in Texas for a Texas corporation is $300. | ||||||
| Ability to do business in other states | Yes | Yes | Unclear in those states that do not have the LLC form. | Yes | Yes | |||||
| Levels of Income Tax | One | Partner level only. | Member level only level. However, former C corporation may be subject to tax. In addition, some states will tax S corporations. | Generally, only shareholder | Corporate and shareholder level | |||||
| Texas Franchis Tax Liability | No | No | Yes | Yes | Yes | |||||
| Formation | N/A | Nontaxable unless disguised sale or the partner is relieved from debt. | Nontaxable unless disguised sale or the member is relieved from debt. | Taxable. However, if the transferors meet the 80% control test of IRC 351, nontaxable except to the extent of debt relief. | Taxable. However, if the transferors meet the 80% control test of IRC 351, nontaxable except to the extent of debt relief. | |||||
| Special Allocation of Income and Loss | N/A | Yes | Yes | No, all allocations are pro rata. | N/A |
| INDIVIDUAL OWNERSHIP | PARTNERSHIP | LIMITED LIABILITY COMPANY ("LLC") | S CORPORATION | C CORPORATION | ||||||
| Deductibility of Losses | No problem | Partners may deduct the partnership's losses only to the extent of their tax basis in their partnership interest which includes their allocable share of partnership debt. | Members may deduct the LLC's losses only to the extent of their tax basis in their LLC interest which includes their allocable share of LLC debt. | Shareholders may deduct the corporation's losses only to the extent of their tax basis in thier stock which does not include any portion of the corporation's debt. | Shareholders may not deduct any of the corporation's losses. | |||||
| At-Risk Limitations | Applicable | Applicable | Applicable | Applicable | Applicable, if closely held | |||||
| Passive Activity Limitations | All "material participation" tests applicable. | Limited partner can be active under only 3 of 7 tests (i.e. essentially, the limited partner must participate in the activity for 500 hours). | It is not clear whether Members or Managers can qualify under all 7 or only 3 tests. | All 7 tests apply. | N/A | |||||
| Fiscal Year | Calendar | Generally calendar | Generally calendar | Generally calendar | No restrictions | |||||
| Cash Distributions | N/A | Nontaxable to the extent of a partner's tax basis in his partnership interest. | Nontaxable to the extent of a member's tax basis in his LLC interest. | Generally nontaxable to the extent of the shareholder's tax basis in his stock. | Taxable as dividends to the extent of the corporation's earnings and profits and then nontaxable to the extent of the shareholder's tax basis in his stock. | |||||
| Liquidations | N/A | Nontaxable to the extent of a partner's tax basis in his partnership interest. | Nontaxable to the extent of a member's tax basis in his LLC interest. | Generally, nontaxable at corporate level and taxable at shareholder level through | Taxable to both corporations and shareholders. |
All contents © Copyright by Adams & Coker. All Legal Rights Reserved.
The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.You may reproduce materials available at this site for your own personal use and for non-commercial distribution. All copies must include the above copyright notice.
This FirmSite® is designed by FindLaw®, a service of Thomson-West.