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S Corporations and Partnerships

This research paper describes the essential similarities and differences between a Subchapter S corporation (an "S corporation") and a partnership with the emphasis on the difference in their treatment for federal income tax purposes. It also includes a discussion of the tax treatment of pension plans and pension benefits. The principal advantage of an S corporation over a partnership is that shareholders of-an S corporation can obtain limited liability and the flow-through tax advantages of a partnership. An S corporation is, however, not the only way owners can obtain those goals. To some degree, a limited partnership can achieve them. Professional corporations can be formed by the owners of certain types of professional firms such as attorneys. And, since 1990, limited liability companies can be formed which offer almost all the advantages of an S corporation without its disadvantages. The taxation of S corporations and partnerships is similar, but there are some important differences. There are few significant differences in the federal taxation of qualified pension plans and pension benefits established by S corporations or partnerships.

S corporations were first proposed to Congress by President Eisenhower in 1954 and became part of the Internal Revenue Code in 1958 as Sections 1361-1379. The code sections dealing with S corporations have been amended several times, most significantly by the Subchapter S Revision Act of 1982 (Pub. L. No. 97-354) and by the Tax Reform Act of 1986. Various proposed revisions in the code were presented to Congress in 1993-199 but they have not been enacted into law. Partnerships have been part of the common law for centuries and are governed by the laws of the 50 states which have passed, with some variations, their versions of the Uniform Partnership Act and the Uniform Limited Partnership Act.

Subchapter S was enacted to allow the owners of closely held businesses "to select th...

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S Corporations and Partnerships. (1969, December 31). In LotsofEssays.com. Retrieved 00:34, March 29, 2024, from https://www.lotsofessays.com/viewpaper/1692831.html