Legal Question in Business Law in Alabama

Re: which form to use

Both LLCs and partnerships report business profits or losses on their personal income tax returns (as opposed to a corporation structure). That's a benefit most people see in those two types of entities. However, the main difference between an LLC and a partnership is that LLC owners are not personally liable for business debts. In other words, creditors USUALLY cannot go after the owner's personal assets to pay off the LLC's debts or liabilities (of course there are exceptions to this general rule). There are some situations in which partners can receive this protection, for example, when they are designated as "limited" partners. Thus, which entity to form depends a lot on whether you're just looking for tax benefits or if you're looking to avoid the liabilities of the business. This is just general information and I really recommend that you see an attorney to talk through the specifics of your situation. There may be reasons that you should form an LLC versus a partnership and vice-versa. You should also speak to your accountant to discuss tax consequences of each entity. Good luck!