The answer to whether a corporation can be a partner in a partnership depends on how the partnership is taxed.

There are several common types of partnerships: General partnerships (GPs), limited partnerships (LPs), multi-member limited liability companies (LLCs), and in some states there are also other types such as limited liability partnerships (LLPs) and limited liability limited partnerships (LLLPs). However, what matters for us is not the type of partnership but rather the way in which the partnership is taxed.

Every partnership will either be taxed as an ordinary partnership, as an S corporation, or as a C corporation. Some types of partnerships such as LPs are only able to be taxed as ordinary partnerships. However, other types of partnerships such as multi-member LLCs can elect to be taxed as ordinary partnerships, as S corps, or even as C corps.

When can an corporation be a member of a partnership?

Both S corps and C corps are allowed to be partners in a partnership if that partnership is itself taxed as either an ordinary partnership or as a C corp. However, if the partnership is taxed as an S corp, then neither an S corp nor a C corp can be a partner.

NOTE: The last sentence applies specifically to partnerships, not all S corps. One S corp is allowed to own a second S corp if the second S corp is a qualified subchapter S subsidiary (QSSS). To be a QSSS, the second S corp must be wholly owned by the first S corp which means the QSSS cannot be a partnership since a partnership must have at least two partners.

Exception: Industry-Specific Restrictions

Every state has a set of industries whose members are regulated as “professionals” and some of these industries also come with state-level laws prohibiting non-professionals from being partners in partnerships that provide services in these industries. For example, no non-lawyer can be a partner in law firm partnership. That applies to corporations as well which means any corporation not entirely owned by lawyers would not be allowed to be a partner in a law firm partnership.

In some industries, the situation is also a bit more nuanced. For example, in the case of real estate brokerages, non-brokers are generally not allowed to be partners. However, that only applies to general partners. If a real estate brokerage was organized as a limited partnership (which would be unusual but not disallowed), then the general partners would need to be brokers (which means any corporation not entirely owned by brokers could not be a general partner), but the limited partners would not need to be brokers.

In general, if you are wondering about whether or not a corporation can be a partner in a partnership that provides legal services, real estate services, insurance services, accounting services, or other regulated professional services, then you’ll need to check your state laws to see what specific restrictions might exist around who can be a partner in such partnerships.