Corporations VS. Partnerships

When starting your real estate ventures, one of the first decisions you will be faced with is what kind of entity you will hold the real estate assets in.

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The type of entity you decide on will affect your taxes, liability and how it is run. Here are some major differences between a corporation and a partnership that can help you decide the best option for your real estate aspirations.

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• A corporation is an independent legal entity owned by shareholders, in which the shareholders decide on how the company is run and who manages it. A partnership is a business in which two or more individuals share ownership. In general partnerships, all management duties, expenses, liability and profits are shared between two or more owners. In limited partnerships, general partners share ownership responsibilities and limited partners serve only as investors.

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• In partnerships, the general partners are held liable for all company debts and legal responsibilities. General partners' assets may be taken to pay company debts. Corporations, on the other hand, do not hold individuals liable for the company's debt or legal obligations. The corporation is considered a separate entity and therefore the corporation itself is responsible for assuming all debts and legal fees, and the shareholders are not at risk of losing personal assets.

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