Discussion response(AD)

1st discussion ANA  

A general partnership is a business owned and run by two or more people known as general partners. General partner share responsibilities for the business’s profits, losses and debts, and managing the business day to day (Nykiel, 2017). General partnerships can be risky since both partners carry the same amount of responsibility, if they business gets sued or owes money both partners are held responsible. When forming a general partnership, it is best to create an agreement and provide information on each of the partners rights and responsibilities. On the other hand, forming a general partnership can be easy and inexpensive. According to Nykiel (2017), general partnerships don’t pay taxes as a business, instead each partner gets taxed. General partnerships must file Schedule K-1 for each general partner and file form 1065 to report income, deduction, gains, and losses to the IRS.

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C-corporations do not have a limit of shareholders, and each owner/shareholder is taxed separately (What Is a C Corporation? n.d.). Some advantages of the C-Corporation include limited liability, no shareholder limit, perpetual existence, enhanced credibility, and unlimited growth potential. Some disadvantages include double taxation, expensive start-up, regulations and formalities, and no-deduction of corporate losses.

From the information given on this week’s discussion and after considering pros and cons on both general partnerships and c-corporation I think the sisters should start a general partnership. General partnerships seem very easy to form and maintain. The sisters can join their qualities and write an agreement to better understand their responsibilities and rights. C-Corporations seem more difficult to create and can be expensive to start and keep up with. 


What is a C-Corporation? (n.d.). Incorporate Retrieved from https://www.incorporate.com/starting-a-business/c-corporation/#:~:text=%20How%20to%20Form%20a%20C%20Corporation%20,other%20certificates%20specific%20to%20your%20industry.%20More%20

Nykiel, T. (2017, July 28). General Partnership: Easy to Form but Lots of Liability. Nerdwallet. Retrieved from https://www.nerdwallet.com/article/small-business/general-partnerships



As of now, since that there are just the two sisters to start the business, a traditional C corporation is not necessary at this moment, because it requires many policies, articles, costs, and regulations as much as registration fees with the Secretary of State in the state of incorporation. Therefore, I would recommend the two sisters – A and B to start a general partnership. It is easy to set up, as a fact, there are not many fees involved, as they don’t need to register with their respective Secretary of State’s office to form the business. Many states recognize general partnerships as soon as business activity begins, thus, if sister “A” brings technical knowledge and contacts with potential customers, while Sister “B” brings the physical facilities to make the product and the necessary money to get the business started, then they can start the general partnership and share responsibilities and obligations, and unlimited personal liability for business debts. They will both need to report their share of profits and losses on their personal income tax return. They don’t need much paperwork to file or enormous business expenses to worry about. All they need is pulling what’s already available to them and work their skills and knowledge to keep the business going. However, if eventually in the future business is starting to be known, it is generating profit as expected, the sisters can expand the partnership where they can hire new employees and solicit more cash from creditors. At this point, they can also take the business to the next level, convert it to a traditional C- Corporation structure. That means, they will still have to file a separate tax return as a business entity but will need to pay corporation tax on any profits earned. This also will convert the two to limited liability and protected them from being liable for the business’s obligations.


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