Taxation Problems: Significant and Non-Significant Issues and Concerns

Taxation problems
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Problems 1
Significant tax issues and concerns
The owners would prefer to pay low self- employment taxes and FICA, whereby both S corporations and taxable corporations are best suited for this purpose. This is because these corporations only pay half FICA in relation to salary. In any case, partnerships and LLCs owners must pay self-employment tax on business income unlike S-corporations who do not pay the tax.
Linda merely contributes services, and hence the ownership structure does not meet the 80 % criteria for control. The transactions are taxable depending on whether they are C or S Corporations.
There is a concern about flexibility in the special allocations, and partnerships are the best option.
One of the options to reduce taxation is through the flow- through entity option as this limits double taxation. Hence, to reduce tax liabilities, then the LLCs and partnerships are more favorable as it is possible to deduct more losses than the S Corporations because the entities have a broader tax basis.
Significant non- tax issues and concerns
The business’s riskiness is an important parameter, and hence Corporations and LLCs should be assed to address concerns on riskiness, as they have more comprehensive liability protections for owners on contrast to partnerships.
There is concern on flexibility of the business structure, and partnerships are suited when pegging compensation based on performance.
The cost implications, ease and time to form an entity are concerns, with general partnerships being the easiest to form.
Dealing with additional new owners
The initial public offering is a concern and it is done for taxable corporations, but LLCs and partnerships can be transformed int...