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 – 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 “S” corporations on top for service type business;
  • Passive and at-risk issues; and
  • General partner versus limited partner interests

Gardner Law Firm, Tyler, Texas and Richardson, Texas