To create a limited partnership, you must file paperwork with your local state. The general partner is liable for all of the partnership s debts and obligations. The general and limited partners can be individuals or entities. Use a limited partnership for such things as owning and operating an apartment building, where financing does not require personal guarantees. A corporation, is a separate legal entity, formed by documents filed with your state, which is owned by one or more shareholders and managed by a board of directors.
Corporations are among the most complex organizations to administer, but they offer many benefits.
Provided you follow some basic rules and rely on competent legal counsel, the shareholders have only their investments at risk. In other words, individual liability is quite low. Sign all contracts in the corporation s name as the corporation s officer, hold board meetings, keep accurate accounting records and use your corporate name in all your correspondence and advertising. You and your lawyer should pay careful attention to the tax and corporate rules for minimizing the cost of the corporation s harvest, or exit strategy , whether it is to sell the business or to take it public. A C corporation may distribute profits to shareholders via a dividend that is then subject to inclusion on the shareholder s individual tax return.