TAX PLANNING FOR BUSINESS VENTURES AND INVESTMENTS

The tax (and business) issues that apply to a venture or investment will depend on the circumstances of the venture and its owners. The following list reflects a few of the matters that should be considered.

• Tax issues should not obscure the importance of other issues, such as protection from liability, relationships among co-owners, and general business planning.
  
  
• Limited liability companies “LLCs” are very popular now and work well for many circumstances. For tax purposes, these are partnerships and can raise complicated issues.



• Corporations are still desirable in many cases. It is generally desirable to eliminate corporate income tax. Usually, this can be done by making an “S” corporation election. Beware of technical “S” corporation rules and limitations.



• It is frequently desirable to provide much of the entity’s capitalization in the form of well-documented debt.



• Other paperwork for corporations and other entities should be maintained up to date.



• Consider all of the taxes that might apply (such as sales tax, property tax, payroll taxes, etc.) State income tax sometimes is almost as significant an issue as federal tax.



• Overall taxes can be reduced by creative forms of compensation. In-kind and stock compensation raise important timing and other issues.



• Estate tax planning should be integrated with income tax planning.



• Pension plans may be a good way to reduce taxes and encourage savings. The applicable rules can be very complicated and technical.