What is the difference between a partnership, an LLC, and an S Corp?
Video Transcription
A partnership and an S corporation are both flow-through entities for federal tax purposes, meaning that those entities don’t pay their own tax. They flow through their income to the owners who pay the tax. Essentially, there’s only one level of taxation in those cases. Partnerships are more flexible in terms of federal taxation because you can do disproportionate distributions and just have a greater flexibility in terms of how you want the partners to be taxed. That kind of flexibility really isn’t there for an S corporation. An LLC is not a tax classification per se. When you have an LLC, you choose how you want the LLC to be taxed, again depending on how it’s owned. An LLC can be taxed as a disregarded entity, meaning it’s invisible for tax purposes, or it can be taxed as a partnership or as an S corporation.
