"5 The key feature of a partnership is the proprietary interest of all the partners, Wheeler v. Comr., T. C. Memo 1978-208. A partnership can be recast by the IRS as an employment relationship-and lose its flow-through tax benefits if one partner, usually the provider of capital, has the power to terminate the arrangement and keep the business, Pounds v. United States, 372 F. 2d 342 (5th Cir. 1967) .
Different Features of S Corporations and Partnerships
In an S corporation, just like any other corporation, a shareholder's liabilities are limited to the amount of his investment. In a general partnership, "all partners investment. In a general partnership, "all partners . . . are held jointly and severally liable for the debts and obligations of the partnership."6 This distinction between an S corporation and a partnership may, however, become blurred for several reasons. A shareholder of a corporation may be required by its creditors to guarantee personally the debts of the corporation. A court may decide to prevent fraud or for other public policy reasons to pierce the corporate veil or hold a shareholder liable on the theory that he is the alter ego of the corporation.7 A limited partner in a limited partnership is also able to limit his liability to the amount of his investment, but only if he "refrains from participating in.the actual control of the partnership," and provided that there is at least one general partner who is liable for the obligations of the partnership.8
An S corporation, like any corporation, has perpetual existence. A partnership will be terminated on the death, withdrawal or bankruptcy of a partner, but this can be avoided by agreement among the partners. Death or withdrawal of any general partner, however, causes the dissolution of a limited partnership.
Every corporation has centralized management and control. In fact,, many partnership agreements so provide. And, finally, corporate shar...
Significant Similarities Between Corporations and Partnerships. (1969, December 31). In LotsofEssays.com. Retrieved 08:49, November 24, 2014, from http://www.collegetermpapers.com/viewpaper/1303880369.html