Also, general partners can share unlimited liability, and each is usually responsible for the acts of the other. A Corporation is a legal entity that functions somewhat like an individual, legally and for tax purposes. Liabilities are held by the corporation, minimizing the personal liability for owners. The corporation operates as a business and can be owned wholly or partially based on registered certificates called stock. To set up a corporation, you must file an application for a legal name, pay a corporate franchise fee to the state in which you file, appoint a board of directors and corporate officers, and keep minutes of periodic meetings of the board.
Income is reported individually by the owners or stockholders on their personal income tax returns.
Also, the owners may deduct the corporation's losses against other sources of income. If your new business will have fewer than 35 stockholders, you may want to talk with your accountant and attorney about this option. Another alternative is a limited liability corporation, in which income and income tax are distributed among partners, but generally the partners are not personally liable for debts. This is a brand new legal form of business. If you are interested in setting up such a corporation, be sure to consult a knowledgeable attorney.