The Choice of Business Entity: Corporate, Pass-Through, and Disregarded Entities

30 Pages Posted: 30 May 2017 Last revised: 3 Dec 2021

See all articles by Alexander Holtan

Alexander Holtan

University of Virginia - Darden School of Business

Mary Margaret Frank

University of Virginia - Darden School of Business

Melissa Garza

University of Virginia - Darden School of Business

Abstract

This technical note focuses on common business entities: sole proprietorships, general partnerships (GPs), limited partnerships (LPs), limited liability partnerships (LLPs), limited liability companies (LLCs), S corporations, and C corporations and offers insights into the basic factors to consider when choosing one of these entities. The Appendix provides an overview of other important entities in the federal tax code: real-estate investment trusts (REITs), regulated investment companies (e.g., mutual funds), and publicly traded partnerships (PTPs).

Excerpt

UVA-C-2293

Rev. Sept. 1, 2016

The Choice of Business Entity:

Corporate, Pass-Through, and Disregarded Entities

When starting a business, there are many important choices that must be made, from the hiring of key personnel to the choice of a business model. One choice that can have far-reaching effects on the success of any business is the legal form through which it will operate and interact with the rest of the business community. Not only does the choice of a legal form have important federal income tax implications, but it can also affect a business owner's administrative workload, the manner in which he runs his day-to-day operations, his ability to transfer his ownership interest, and how he can compensate his employees. This technical note focuses on common business entities: sole proprietorships, general partnerships (GPs), limited partnerships (LPs), limited liability partnerships (LLPs), limited liability companies (LLCs), S corporations, and Ccorporations and offers insights into the basic factors to consider when choosing one of these entities. Appendix 1 provides an overview of other important entities in the federal tax code: real-estate investment trusts (REITs), regulated investment companies (e.g., mutual funds), and publicly traded partnerships (PTPs).

State Law Entities

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Keywords: sole proprietorships, general partnerships, limited partnerships, limited liability partnerships, limited liability companies, S corporations, C corporations, legal entities, pass-through, corporation, disregarded entities

Suggested Citation

Holtan, Alexander and Frank, Mary Margaret and Garza, Melissa, The Choice of Business Entity: Corporate, Pass-Through, and Disregarded Entities. Darden Case No. UVA-C-2293, Available at SSRN: https://ssrn.com/abstract=2974011 or http://dx.doi.org/10.2139/ssrn.2974011

Alexander Holtan

University of Virginia - Darden School of Business

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

Mary Margaret Frank (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4432 (Phone)
434-243-5021 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/frank.htm

Melissa Garza

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

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