Question

Partnership structure basics, what are the differences between corporations vs. a partnership in terms of financial statement?

Answer 1

For the sole proprietorship, partnership, LLC, or Subchapter S Corporation, the net profit item is shown on the income statement immediately after interest expense because businesses income taxes are paid by the individual owners instead of the business. On contrary, for the corporation, the net income also known as net profit is computed after paying all expenses, including interest and taxes.

Also Internal Revenue Service (IRS) categorise a corporation as an independent tax entity thus these are required to compute the federal income tax on earnings, filing of the appropriate reports and remit payment; and the result can cause “double-taxation”. On contrary, IRS considers partnerships as “pass-through” entities thus is not subject to federal income tax on earnings and can avoid the dual taxation