Implications of choosing a tax entity:

  • Double taxation under C,
    • Blocker;
    • Non-profits;
    • Consolidated group; and
    • Public entity;
  • Single taxation of S:
    • Can be tax free if control on contribution;
    • Exit tax on withdrawal, reconsider contributing appreciating assets;
    • W2 ā€“ K-1 analysis, self-employment income and how low do you go;
    • Conversion of C to S:
      • Built in gains tax;
      • LIFO recapture; and
      • Excess passive income;
    • One class of stock and problems with carried interests; and
    • Problems with debt outside of safe-harbor debt;
  • Partnership:
    • Entrance and exit can be tax free;
    • Excellent entity to place ā€œSā€ corporations on top for service type business;
    • Passive and at-risk issues; and
    • General partner versus limited partner interests.