In the first part of our series concerning entity selection for owning real estate, we addressed sole proprietorships and tenants in common. Here we examine the business and tax law considerations concerning partnerships.
General Partnerships
A general partnership is essentially an association of two or more people to carry on a business as co-owners. No written agreement is necessary to have a general partnership. One advantage of the general partnership form of ownership is tax benefits. No taxable event happens at the partnership level. In other words, no double taxation occurs in a general partnership. The usual test the IRS uses to determine if a partnership exists is whether the partners share profits and losses, jointly own the capital and assets, and jointly control and manage the business.
General Partnership Advantages and Disadvantages
Other advantages of general partnerships include the following:
- Each partner can participate in the management of a general partnership.
- Continuity of the general partnership can be established.
- The ownership interest in a general partnership is treated as personalty rather than realty. ...
