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Homework answers / question archive / Choosing a partnership as a tax entity has consequences, and those consequences often are different than those that arise from choosing the corporate form
Choosing a partnership as a tax entity has consequences, and those consequences often are different than those that arise from choosing the corporate form. Many of these consequences can be quite dramatic, particularly if the business goes sour or if catastrophic, unforeseen circumstances arise, and many of them don't have a thing to do with taxes. What are some of the more significant non-tax consequences of choosing the partnership form? Which ones do you think are the most important, and why?
Choosing a partnership as a tax entity does have consequences, especially if the partnership profits grow. Some of the more significant non-tax consequences of choosing the partnership form is the liability. Under a partnership you can be sued for not only your business assets but also your personal assets. The liability for the partners is unlimited which is a major consequence of choosing the partnership form. One partner is also liable for the choices and actions of the other partner which can be extremely consequential. It can be difficult to value the assets if a partner decides that they want out of the business. I think the most important consequence is the liability. If a partner was sued they could potentially have everything taken from them including their house.
