Per Diem Rates from the U.S. General Services Administration
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Rates are set by fiscal year, effective October 1 each year. Find current rates in the continental United States ("CONUS Rates").
Advantages and Disadvantages of a Partnership
Advantages of a Partnership
Raising Capital
Starting a business may require more capital than you alone can afford. Or, your business may require some particular expertise that you don't possess and can't afford to pay for by hiring someone. A partnership offers you a broader range of possibilities for raising capital and expanding your business than a sole proprietorship. Such capital may be in the form of money, services, or both.
No Double Taxation:
Pass-though entities avoid double taxation because income is not taxed at the entity level, it is taxed at the individual level. All items of income, deductions, gains, losses and credits pass through the entity to each partner via Schedule K-1, which is issued annually. Partners report pass-through items on their individual income tax return. The partnership reports its income, deductions, gain, losses and credits on Form 1065 annually. However, no income tax computaion is made on Form 1065. In other words, a partnership is a tax-reporting entity and not a tax-paying entity.
Each pass-through item reported on Schedule K-1 retains its tax character after being passed through to the partners. For example, charitable contributions made by the partnership remain charitable contributions when passed through to each partner and each partner who may claim the contributions as a deduction on his/her individual income tax return.
Flexibility in Allocating Income
Partners may agree to allocate income disproportionately to the their percentage interest in the partnership. For example, if Joe made a capital contributionsof 40% Mary made capital contributions of 60%, they may agree to pay Joe 70% of the profits and Mary 30% of the profits. This may be justified if Joe has a critical skill needed by the business. This is contrast to the ruls for S corporation distributions. Distributions made by S corporations must be in proportion to each shareholder's percentage ownership of the stock in the S corporation. Had Joe and Mary be S corporation shareholders, distributions would have to be 40% for Joe and %60 for Mary.
Disadvantages of a Partnership
Unlimited Liability
A major downside of the partnership form of organization is the extent to which each partner is liable for partnership debts. A general partner's legal responsibility is broad, extending beyond just his own actions. In addition, each partner's personal assets may also be at risk.
General partners are jointly and severally liable for partnership debts. This means, each general partner may be personally liable for all the debts of the partnership if the other partners are unable to satisfy the debts of the business.
In addition to being liable for the debts of the business, each general partner may also be liable for the negligent and wrongful acts (torts) committed by employees and partners in the scope of partnership business. On the other hand, a limited partner, someone who simply invests in the partnership to get a return on investment but does not play a role in the daily operations or management of the business, is only liable up to amount of his or her investment in the partnership. A limited partner's personal assets are off limits.
Accounting and Legal Costs:
The accounting function of a partnership can be complex. For example, when the partnership is created, each partner's interest and tax basis in the partnership must be established and recorded in the books of the business. Then each partner's interest and tax basis must be updated periodically to reflect changes resulting from profits, losses, loans, and distributions from the partnership.
Legal costs may have to be incurred to create a partnership agreement. In addition, if a partner sells his interest in the partnership or dies, an attorney may be needed to ensure that legal-related issues are handled properly.
Cost of a Professional Recruitment Service:
Because of the broad liability of each partner, a more judicious approach in the selection process of additional partners and employees may be necessary. A professional recruitment service may have to be retained to perform an objective investigation into the background (criminal and financial) of potential employees or partners.