In most acquisition transactions, one company will purchase the assets of another company. An asset deal has the benefit of allowing the acquiring company to select only those assets or lines of business of the target company that it wants to acquire. It enables the acquirer to recover its purchase price through depreciation and amortization,
Selling Your Business? Careful of Employee Expectations.
Once Upon A Time . . .
a corporation, Corp, was founded. The year was 2006, and Employee immediately was hired as Corp’s chief technology officer and received restricted stock grants from Corp. As a “founder” of Corp, Employee initially owned 9.8% of Corp’s stock. However, each time investors infused capital into Corp, Employee’s interest
Removing A Minority Shareholder
During their life cycles, most closely held businesses will face the unpleasant task of dealing with a difficult, or otherwise unwanted, minority shareholder. Family-owned businesses as well those in which the owners are unrelated are likely to encounter this issue. At some point in its existence, the original owners of the business will: have a
Outside Basis: “But I Promised to Pay!”
A Common Fact Pattern
Partner One and Partner Two started LLC in 2002. LLC was treated as a partnership for tax purposes. They contributed a good deal of their savings and labor, but LLC lost money for the first several years of operation. Another partner, deep-pocketed Corporation, was willing to contribute almost one million dollars
Keeping It In the Family? Beware Accidental Gifts.
From a tax perspective, partnerships and limited liability companies are, by far, the most flexible of business vehicles. Among other benefits, they have no restrictions as to ownership or as to classes of equity; special allocations and disproportionate distributions may be provided for in the partnership or operating agreement; and there is pass-through tax treatment.
Keeping It Real, Especially In A Family Business
A taxpayer has the legal right to minimize his or her taxes, or to avoid them completely, by any means that the law allows. However, this right does not give the taxpayer the right to structure his or her affairs by using “business entities” that have no economic reality and that are employed only to
Recordkeeping: It’s Not Optional
For the owner of a closely-held business, and especially one with a limited support staff, it can be easy to drift into carelessness or, worse, neglect, when it comes to maintaining detailed records of the business’s expenses. However, as one taxpayer recently learned the hard way, such inattention to detail can come back to haunt
Parents Getting Good Kids In Trouble
When a parent hires a child in the family business, makes them an officer in that business, or grants them an equity interest in the business, the parent’s goal in doing so is to help the child. Unfortunately, those same acts may place the child in harm’s way. Similarly, when a child seeks to assist
Arm’s Length Merger or Gift?
Every now and then, a case comes along that is just chock-full of lessons, not only for taxpayers, but for their advisors as well. The Tax Court’s decision in Cavallaro v. Comr
. describes such a case. It involves closely held corporations, related party transactions, a tax-free reorganization and, oh yeah, a huge taxable gift.
No Money To Pay A Bonus? Did It Really Happen?
Sometimes, the U.S. Tax Court will rule on a matter the outcome of which would seem – at least to an outsider, or on some visceral level – to have been a foregone conclusion. Indeed, one is often left wondering how such a matter was allowed to progress through an IRS audit, IRS Appeals, the