{"id":2141,"date":"2015-10-02T13:04:48","date_gmt":"2015-10-02T18:04:48","guid":{"rendered":"https:\/\/taxprocenter.proconnect.intuit.com\/?p=2141"},"modified":"2017-10-17T17:48:10","modified_gmt":"2017-10-17T22:48:10","slug":"advising-clients-on-type-of-entity","status":"publish","type":"post","link":"https:\/\/accountants.intuit.com\/taxprocenter\/tax-law-and-news\/advising-clients-on-type-of-entity\/","title":{"rendered":"Advising Clients on Type of Entity"},"content":{"rendered":"<p><span style=\"font-weight:400;\">One of the common questions a client may ask you is whether the should incorporate their business. Or perhaps, your client saw an article online about the advantages of LLCs, and now seeks your guidance on if they should create one for their business.<\/span><\/p>\n<p><span style=\"font-weight:400;\">Let\u2019s explore, at a basic level, some of the advantages and disadvantages of some of the more common business entity types.<\/span><\/p>\n<h3><b>Sole Proprietorships<\/b><\/h3>\n<p><span style=\"font-weight:400;\">A sole proprietorship is the simplest and most common business structure. This is an unincorporated business with one owner. There is no legal distinction between the business and the owner. Here are some advantages and disadvantages of sole proprietorships:<\/span><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-2148\" src=\"https:\/\/taxprocenter.proconnect.intuit.com\/wp-content\/uploads\/2015\/10\/sole-prop.png\" alt=\"Sole prop\" width=\"723\" height=\"535\" \/><\/p>\n<p><b>Resources:<\/b><\/p>\n<ul>https:\/\/taxprocenter.proconnect.intuit.com\/wp-admin\/post-new.php<\/p>\n<li style=\"font-weight:400;\"><a href=\"http:\/\/www.irs.gov\/pub\/irs-pdf\/i1040sc.pdf\" data-wa-link=\"body_irs-i1040sc\" target=\"_blank\"><span style=\"font-weight:400;\">IRS Schedule C Profit or Loss From Business (Instructions)<\/span><\/a><\/li>\n<li style=\"font-weight:400;\"><a href=\"http:\/\/www.irs.gov\/pub\/irs-pdf\/p334.pdf\" data-wa-link=\"body_irs-p334\" target=\"_blank\"><span style=\"font-weight:400;\">IRS Publication 334 Guide for Small Businesses<\/span><\/a><\/li>\n<\/ul>\n<h3><strong>Partnership<\/strong><\/h3>\n<p><span style=\"font-weight:400;\">At a fundamental level, a partnership is the agreement of two or more people to go into business together. At the federal level, a partnership is not taxed, but instead serves as a conduit to distribute all of the income and expenses to the partners.<\/span><\/p>\n<p><span style=\"font-weight:400;\">When advising your clients on establishing a partnership, consider the various types, including the following:<\/span><\/p>\n<ul>\n<li style=\"font-weight:400;\"><span style=\"font-weight:400;\">General Partnerships<\/span><\/li>\n<li style=\"font-weight:400;\"><span style=\"font-weight:400;\">Limited Partnerships<\/span><\/li>\n<li style=\"font-weight:400;\"><span style=\"font-weight:400;\">Limited Liability Partnerships<\/span><\/li>\n<li style=\"font-weight:400;\"><span style=\"font-weight:400;\">Limited Liability Limited Partnerships (not recognized in all states)<\/span><\/li>\n<li style=\"font-weight:400;\"><span style=\"font-weight:400;\">Joint Ventures<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight:400;\">Each of these types of partnerships has its own advantages and disadvantages, and many of those factors will depend on the nature of the particular business. This article presents advantages and disadvantages of partnerships at a general level:<\/span><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-2158\" src=\"https:\/\/taxprocenter.proconnect.intuit.com\/wp-content\/uploads\/2015\/10\/ad-dis.png\" alt=\"Ad dis\" width=\"721\" height=\"37\" srcset=\"https:\/\/taxprocenter.proconnect.intuit.com\/wp-content\/uploads\/2015\/10\/ad-dis.png 721w, https:\/\/taxprocenter.proconnect.intuit.com\/wp-content\/uploads\/2015\/10\/ad-dis.png?resize=150,8 150w, https:\/\/taxprocenter.proconnect.intuit.com\/wp-content\/uploads\/2015\/10\/ad-dis.png?resize=300,15 300w, https:\/\/taxprocenter.proconnect.intuit.com\/wp-content\/uploads\/2015\/10\/ad-dis.png?resize=700,36 700w\" sizes=\"auto, (max-width: 721px) 100vw, 721px\" \/><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-2150\" src=\"https:\/\/taxprocenter.proconnect.intuit.com\/wp-content\/uploads\/2015\/10\/partnership.png\" alt=\"Partnership.png\" width=\"717\" height=\"884\" \/><\/p>\n<p><b>Resources<\/b><\/p>\n<ul>\n<li style=\"font-weight:400;\"><a href=\"http:\/\/www.irs.gov\/pub\/irs-pdf\/i1065.pdf\" data-wa-link=\"body_irs-i1065\" target=\"_blank\"><span style=\"font-weight:400;\">IRS Form 1065 Return of Partnership Income Instructions<\/span><\/a><\/li>\n<li style=\"font-weight:400;\"><a href=\"http:\/\/www.irs.gov\/pub\/irs-pdf\/p541.pdf\" data-wa-link=\"body_irs-p541\" target=\"_blank\"><span style=\"font-weight:400;\">IRS Publication 541 Partnerships<\/span><\/a><\/li>\n<\/ul>\n<h3><b>S Corporation<\/b><\/h3>\n<p><span style=\"font-weight:400;\">An S corporation is a legal entity separate from its owner or owners. While it has similar requirements to a C corporation, it also has a pass-through feature like a partnership. Of course, there are specific requirements for making the S election, so become familiar with those before advising your client of this option. Here are some advantages and disadvantages of an S corporation:<\/span><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-2151\" src=\"https:\/\/taxprocenter.proconnect.intuit.com\/wp-content\/uploads\/2015\/10\/s-corp.png\" alt=\"S Corp\" width=\"841\" height=\"588\" \/><\/p>\n<p><b>Resources<\/b><\/p>\n<ul>\n<li style=\"font-weight:400;\"><a href=\"http:\/\/www.irs.gov\/pub\/irs-pdf\/i2553.pdf\" data-wa-link=\"body_irs-i2553\" target=\"_blank\"><span style=\"font-weight:400;\">IRS Form 2253 Election by a Small Business Corporation (Instructions)<\/span><\/a><\/li>\n<\/ul>\n<h3><b>C Corporation<\/b><\/h3>\n<p><span style=\"font-weight:400;\">A C corporation is also an incorporated entity that is separate from its owners. Most larger corporations, including publicly traded companies, are C corporations. Here are some advantages and disadvantages of C corporations:<\/span><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-2153\" src=\"https:\/\/taxprocenter.proconnect.intuit.com\/wp-content\/uploads\/2015\/10\/c-corp.png\" alt=\"C corp\" width=\"840\" height=\"249\" \/><\/p>\n<p><b>Resources<\/b><\/p>\n<ul>\n<li style=\"font-weight:400;\"><span style=\"font-weight:400;\">IRS Publication 542 Corporations<\/span><\/li>\n<li style=\"font-weight:400;\"><span style=\"font-weight:400;\">IRS Form 1120 U.S. Corporation Income Tax Return (Instructions)<\/span><\/li>\n<\/ul>\n<h3><b>Limited Liability Company<\/b><\/h3>\n<p><span style=\"font-weight:400;\">A limited liability company has a hybrid legal structure. For federal tax purposes, an LLC is not a separate entity, but for some states it is. When your client chooses to form an LLC, you should also discuss what type of tax entity the business will have for federal filing purposes. An LLC can be a sole proprietorship (Single-Member LLC or SMLLC), a partnership or a corporation.<\/span><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-2155\" src=\"https:\/\/taxprocenter.proconnect.intuit.com\/wp-content\/uploads\/2015\/10\/llc.png\" alt=\"LLC.png\" width=\"844\" height=\"870\" \/><\/p>\n","protected":false},"excerpt":{"rendered":"<p>One of the common questions a client may ask you is whether the should incorporate their business. Or perhaps, your client saw an article online about the advantages of LLCs, and now seeks your guidance on if they should create one for their business. Let\u2019s explore, at a basic level, some of the advantages and<\/p>\n","protected":false},"author":107319753,"featured_media":10765,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"rkv_browse_by_id":0,"rkv_cta_id":0,"rkv_optimize_for_pagespeed":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"useModifiedDate":false,"customPublishDate":"","_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"_wpas_customize_per_network":false},"categories":[509474089],"tags":[],"intuit_collection":[],"intuit_series":[],"coauthors":[509474222],"class_list":["post-2141","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-tax-law-and-news"],"header_image":"","yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.3 (Yoast SEO v27.3) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Advising Clients on Type of Entity - Tax Pro Center | Intuit<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/accountants.intuit.com\/taxprocenter\/tax-law-and-news\/advising-clients-on-type-of-entity\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Advising Clients on Type of Entity - Tax Pro Center | Intuit\" \/>\n<meta property=\"og:description\" content=\"One of the common questions a client may ask you is whether the should incorporate their business. Or perhaps, your client saw an article online about the advantages of LLCs, and now seeks your guidance on if they should create one for their business. Let\u2019s explore, at a basic level, some of the advantages and\" \/>\n<meta property=\"og:url\" content=\"https:\/\/taxprocenter.proconnect.intuit.com\/tax-law-and-news\/advising-clients-on-type-of-entity\/\" \/>\n<meta property=\"og:site_name\" content=\"Tax Pro Center | Intuit\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/IntuitAccountants\" \/>\n<meta property=\"article:published_time\" content=\"2015-10-02T18:04:48+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2017-10-17T22:48:10+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/taxprocenter.proconnect.intuit.com\/wp-content\/uploads\/2017\/08\/tax-professional-with-clients-e1535552243931.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"655\" \/>\n\t<meta property=\"og:image:height\" content=\"370\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Pam Welsh\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@IntuitAccts\" \/>\n<meta name=\"twitter:site\" content=\"@IntuitAccts\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Pam Welsh\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/taxprocenter.proconnect.intuit.com\\\/tax-law-and-news\\\/advising-clients-on-type-of-entity\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/taxprocenter.proconnect.intuit.com\\\/tax-law-and-news\\\/advising-clients-on-type-of-entity\\\/\"},\"author\":{\"name\":\"Pam Welsh\",\"@id\":\"https:\\\/\\\/accountants.intuit.com\\\/taxprocenter\\\/#\\\/schema\\\/person\\\/b4823f0613e93cf4cc24b701d9dad9c3\"},\"headline\":\"Advising Clients on Type of Entity\",\"datePublished\":\"2015-10-02T18:04:48+00:00\",\"dateModified\":\"2017-10-17T22:48:10+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/taxprocenter.proconnect.intuit.com\\\/tax-law-and-news\\\/advising-clients-on-type-of-entity\\\/\"},\"wordCount\":459,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\\\/\\\/accountants.intuit.com\\\/taxprocenter\\\/#organization\"},\"image\":{\"@id\":\"https:\\\/\\\/taxprocenter.proconnect.intuit.com\\\/tax-law-and-news\\\/advising-clients-on-type-of-entity\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/taxprocenter.proconnect.intuit.com\\\/wp-content\\\/uploads\\\/2017\\\/08\\\/tax-professional-with-clients-e1535552243931.jpg\",\"articleSection\":[\"Tax Law and News\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\\\/\\\/taxprocenter.proconnect.intuit.com\\\/tax-law-and-news\\\/advising-clients-on-type-of-entity\\\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/taxprocenter.proconnect.intuit.com\\\/tax-law-and-news\\\/advising-clients-on-type-of-entity\\\/\",\"url\":\"https:\\\/\\\/taxprocenter.proconnect.intuit.com\\\/tax-law-and-news\\\/advising-clients-on-type-of-entity\\\/\",\"name\":\"Advising Clients on Type of Entity - 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