A taxpayer is able to choose from three different tax structures upon forming his or her business. These three different businesses are known as partnerships, “C” corporations and “S” corporations. For methods of incorporation, the internal revenue code dictates a business entity on how they can benefit the taxpayer in the most tax efficient way. The main objective for a business entity and its owners or shareholders is to start a business that fits the owner’s needs and to avoid paying more taxes than the company or individual has to. “Passed by congress on July 2, 1909 and ratified February 3, 1919, the sixteenth amendment established Congress’s right to impose a federal income tax” (Milestone Documents, National Archives).
Also, it’s imperative to establish and be familiar with a taxable year for the business entity. The impact that a taxable year has on the entity establishes the rules and regulations on how to compute the basis for the owners, taxable income, deductibility of losses, current or liquidating distributions, and treatments during those distribution events. All of these events influence the procedures in forming a business entity under the United States incorporation statutes. …show more content…
Owners, partners and shareholders should pick the most tax friendly forms of operation for their particular business. The most common things owners need to think about before forming a business entity would be to raise capital, transferring interests to existing or new owners and the longevity of how long the business will continue. Another consideration to look for during the formation of a business is how the business will be managed. This is important due to the fact that there are several important revenue recognition issues that make each form of business entity unique with their respective rules and
Also, it’s imperative to establish and be familiar with a taxable year for the business entity. The impact that a taxable year has on the entity establishes the rules and regulations on how to compute the basis for the owners, taxable income, deductibility of losses, current or liquidating distributions, and treatments during those distribution events. All of these events influence the procedures in forming a business entity under the United States incorporation statutes. …show more content…
Owners, partners and shareholders should pick the most tax friendly forms of operation for their particular business. The most common things owners need to think about before forming a business entity would be to raise capital, transferring interests to existing or new owners and the longevity of how long the business will continue. Another consideration to look for during the formation of a business is how the business will be managed. This is important due to the fact that there are several important revenue recognition issues that make each form of business entity unique with their respective rules and