You’re better off I think keeping it as a partnership rather than electing S-Corp status in my opinion.
1. You won't have the tax basis issues that S-Corps can have if you wind up borrowing a significant piece of the price and there are losses.
2. A partnership provides the flexibility of how profits\losses are split if that ever becomes a necessity. S-Corp profits\losses must be divided based upon ownership of shares.
3. For estate planning purposes gifting shares of that partnership to future generations is usually easier and continues to allow flexibility in the division of profits\losses. This is one reason why you always hear of family limited partnerships instead of family S-Corps during estate planning discussions.
What about liability issues on the property owned by a partnership?
The LEGAL entity is an LLC, which provides liability protection, for income tax reporting you may use form 1065, partnership reporting. Don’t confuse partnership as an income tax reporting method with general partnerships from a legal entity perspective. Your point is well taken though, general partnerships are generally a thing of the past due to the legal liability issues. Even these "family partnerships" for estate planning purposes are LLC's these days, reporting as partnerships for income tax purposes.
This post first appeared on Dentaltown.
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