Partners taxed on proportionate shares of partnership income whether or not distributed. Partnership return is merely an information return.
Income is taxed to the corporation: stockholders are taxed only on dividends distributed to them.
Partners taxed on accumulated as well as distributed earnings.
Stockholders are not taxed on accumulations. However, penalty tax applies if purpose is to avoid tax and accumulation exceeds a certain amount.
Partners taxed on their proportionate shares of gain and loss. They apply the limitations just as if they had only individual gains and losses.
A corporation uses the alternative computation.
Partners not taxed on exempt interest received from the firm.
Exempt interest distributed by a corporation would be fully taxable income to the stockholders.
The partners add their proportionate shares of the partnership's contributions to their own personal contributions in computing their incomes.
Corporations take their own deduction for charitable contributions; but the maximum deduction is a fraction of an individual taxpayer's maximum deduction.
Partners can be beneficiaries of a Keogh plan.
Officers and employee stockholders can be beneficiaries of a pension plan.
Partners don't pay Social Security tax on compensation from the firm, but must pay self-employment tax.
Compensation to officer and employee stockholders is subject to Social Security tax.
In most states, partnerships not subject to state income and purchase taxes.
Corporations are subject to these taxes, although deductibility on federal return lessens cost.
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