Choice of Entity and Tax Issue Entity Formations: Part 1

Author: Jennifer Kowal

This course will discuss business advantages and disadvantages of C-corporations, S-corporations, LLC's, partnerships and sole proprietorships. It will also cover the tax advantages and disadvantages of each entity type. Finally, the course will cover the tax treatment and potential pitfalls involved in forming each type of entity.

Publication Date: July 2022

Designed For
Tax practitioners at all levels who advise on the tax issues involved in forming business entities.

Topics Covered

• Overview of Different Types of Entities
• Employment Taxes and Employee Benefits
• Business advantages and disadvantages to various business entity structures
• Tax advantages and disadvantages of various business entity structures
• Tax treatment of formation transactions for C corporations, S corporations, LLCs and partnerships
• Potential current and future pitfalls of forming each entity type

Learning Objectives

• Describe the business advantages and disadvantages of using C corporations, S corporations, LLCs, partnerships and sole proprietorships
• Identify the tax advantages and disadvantages of each entity type
• Describe tax consequences to forming various types of entities
• Differentiate business structures and describe how they are applied
• Recognize stock options in a Corporation
• Identify correct statements with respect to profits interest
• Recognize whether an entity is separate from its owners in regards to the evaluation
• Identify proper examples of an ineligible entity with respect to its tax classification
• Describe default classification
• Recognize what happens when a corporation changes to a partnership
• Describe how changes in entity classification considerations changed due to the passage of TCJA
• Identify the price at which a stock option holder may purchase a share of stock by using the option
• Recognize what is a factor in the LLC four factor test prior to 1997
• Identify which IRS forms are used in various scenarios
• Describe which type of structures applies to a business if there is a sole owner and no action is taken to form an entity
• Identify which partners control and run the business but end up with unlimited liabilities in a limited partnership
• Recognize how many shareholders an S Corporation is limited to
• Identify the difference between the strike price and the fair market value of stock on the date of exercise of a stock option
• Recognize which type of entities gets its choice of tax classification

Level
Basic

Instructional Method
Self-Study

NASBA Field of Study
Taxes (4 hours)

Program Prerequisites
None

Advance Preparation
None