I am blind.
What is the difference among these?
What is the difference among these?
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TTB, pages 20-11 and 20-12 has some info on this.
Basically, for federal tax purposes, they all file a 1065 as a partnership, unless they elect to be taxed as a corporation, or unless they are a single member organization.
The difference has to do with state law and the limited liability protection they receive.
For example, a limited partnership will have at least one general partner liable for partnership debt, and a number of limited partners who are only at risk for the money they invested in the partnership. An LLC, on the other hand, extends liability protection to all partners.
An LLP is usually a situation where under state law, a particular business cannot be an LLC or a corporation, but they can be an LLP. I think it generally has to do with a state that won’t allow a professional organization, such as a group of doctors or lawyers, who cannot be a corporation or an LLC under state law, but can be an LLP under state law. The LLP gives them liability protection against the malpractice of other owners, but does not give them liability protection against their own malpractice and the debt of the business.
These are generalizations and I think there is probably a variation on the theme depending on which state you are talking about.
For federal tax purposes, there is no difference other than the way in which you allocate at-risk basis among the partners. -
State tax
In Texas an LLC has to pay Franchise Tax (or margin tax which is the new version next year).
An LLC has to get a state charter, but a partnership is not required to have a state charter and does not pay Franchise/Margin tax.
Since Texans don't like income tax they call income "Earned Surplus" and taxed in under the franchise tax. Next year it will be a tax on a legislative defined "gross income" instead of on net income. Under this tax, it will be possible to owe tax even if the company has a net loss.Comment
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