Term
Corporate Formations & Capital Structure
(2 of 2) |
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Definition
•§351: Deferring gain or loss upon incorporations
•Choice of capital structure
•Worthless stock or debt obligations
•Tax planning considerations
•Compliance & procedural considerations
•Financial statement implications
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Term
Corporate Formations & Capital Structure
(1 of 2) |
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Definition
-Organization forms available
-Legal requirements for forming a corporation
-Check-the-box regulations
-Tax considerations in forming a corporation |
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Term
Organization Forms Available |
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Definition
•Sole proprietorships
•Partnerships
•Corporations
–C Corporations
–S Corporations
•Limited liability companies
•Limited liability partnerships |
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Term
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Definition
•One owner
•Not a separate legal entity
–Income reported on Sch. C of 1040
•No limited liability |
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Term
Sole Proprietorship
Tax Advantages |
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Definition
| -Tax advantages -Profits taxed once -Proprietor’s marginal tax rate may be lower than if business were taxed as a corporation -No tax on contributions or withdrawals -Losses offset other income (with limitations) |
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Term
Sole Proprietorship
Tax disadvantages |
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Definition
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Profits taxed as earned, not as received
–Corporate tax rates may be lower than proprietor’s marginal tax rate
–Owner not employee
•Profits subject to SE tax
•Not eligible for some tax-exempt fringe benefits
•Compensation to owner not deductible
–No fiscal year deferral
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