Answers · Partnerships · Form 1065
Partnership vs. S Corporation: What's Different?
Partnerships offer flexible allocations and liability-basis rules; S corporations have shareholder restrictions, pro-rata allocation and wage rules.
How it works
The rule, and what it turns on.
Choice depends on economics, owner services, losses, debt, distributions, benefits, state tax and exit plan.
Example
Leveraged real estate may benefit from partnership debt basis; a service business may compare S wages/distributions.
Common mistakes
What we see go wrong, and what we do instead.
- Choosing solely for payroll-tax savings.
A better approach
- Model federal and Texas effects for expected facts.
Authority
Where this comes from, so you can check it.
IRC Subchapters K and S.
Educational information, not individualized tax advice. Treatment depends on your facts, entity classification and tax year, and IRS instructions change. Confirm your own position with us before relying on it. Mint Associates does not provide legal services.
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