In a partnership, the debts of the business are the responsibility of each partner. LLCs award liability protection, meaning members are only liable for the debts of the business entity to the extent of their personal contribution. Typically, members aren’t liable for the company’s debts.

However, an LLC does have advantages over a partnership in that an LLC can also elect to be taxed as a corporation. Some LLC owners find that they can save money on taxes and boost their retirement savings by electing S corporation status. However, not all LLCs qualify to be taxed as S corporations.

When is a LLC considered to be a partnership?

When partners do business together, they are considered collectively as one. All owners are responsible for the business’ debts and each other. For tax purposes, any U.S. LLC with more than one member is considered a partnership. After you the employee identification number, or EIN, is received, the partnership requires no further action.

How does a married couple form a LLC?

If you select an S corporation, income is reported by the LLC but is passed through to you as owners and then you report that income yourselves but do not pay self-employment tax as a partnership would. Creating an LLC as a married couple gives you the opportunity to work together and leverage some tax flexibility.

When do you need a partnership at will?

A partnership at will is a useful and rather simple way to form a business. If you have other individuals that you wish to work with to create a company, this is a simplified way to do so. What is a Partnership? A partnership is a type of business structure where two or more people operate and manage a business with the goal to make a profit.

Where can I get help forming a LLC?

If you need help with deciding if your partnership should form an LLC, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site.