Ibf fund liquidating llc tax information
For these businesses, the double tax bogeyman rarely appears, and most exits are structured as one layer of tax stock sales.If an LLC is not so great, but you desire pass through tax treatment, an S Corporation could be a great choice for you if you qualify.
There are a number of reasons.1 – Many Investors Don’t Like LLCs – Investors frequently don’t want to complicate their personal tax situation by becoming a member in an entity taxed as a partnership.LLC – LLCs, like S Corporations, are “pass-through” entities, which means that their owners (referred to as members) pay the tax on the income of the LLC that is allocated to them based on the LLC agreement.For a sole member, unless an election is made to be taxed as a corporation, the LLC is treated as a “disregarded entity,” meaning that the sole member reports the LLC’s income or loss on his or her tax return just like a sole proprietorship, or division in the case of a corporate owner.Keep in mind though that if you are a founder you will forego the potential 1202 reduction in capital gains tax rate and Section 1045 rollover benefits for your founder shares if you form as an S Corporation.I generally advise my startup clients to go with a C Corporation because it’s easier.LLC agreements are more difficult and complex to prepare than their corporate counterparts.
In addition, you can hit upon sticky and highly complex tax issues in the LLC context that just don’t exist or arise in the corporate context.
Tell your Congressional representatives to renew it!
)The bogeyman that you will hear about most frequently is the “double tax” bogeyman.
Investors can be finicky and any sort of obstruction or tax inconvenience can turn a hot investor very cold very quickly.
Of all of the decisions you will make in starting your business, perhaps none will affect you more tomorrow than your choice of entity.
And if it pays dividends to its shareholders, they will pay tax on the dividends. And so if you anticipate your business being a cash cow, and immediately generating so much money that you will earn more than you can reasonably pay out in salary to the owner executives, then maybe an LLC is a good choice for you.