For most closely-held businesses, and especially for those that are newly-formed, the infusion of capital is of paramount concern because it may be needed to fund start-up costs, operations and, eventually, expansion. In some cases, the capital may be obtained from investors in exchange for an equity interest in the business; in others, the capital
Deciding your own salary? Time for a reasonableness check.
Own your own business, decide your own salary… right?
Wrong.
The Tax Court recently upheld corporate tax deficiencies and accuracy-related penalties assessed by the IRS after it disallowed as a business expense deduction half of $2 million in bonuses paid by an eye care center (the “Center”) to its sole shareholder. The sole shareholder, who
Corporate Tax, Transferee Liability and . . . the Minority Shareholder? (Part 1 of 2)
In prior posts, we have considered the “plight” of minority shareholders in various contexts. We have reviewed their inability to influence corporate decisions, to compel a dividend distribution or a redemption of their shares.
In spite of these shareholders’ non-controlling status, we have seen situations in which the taxing authorities have, nonetheless, held them
Shareholder Buy-Outs In A Closely-Held Corp.: Part I
Every owner of a closely-held corporation has certain property rights, arising from his or her status as an owner, that have economic value to the owner. At the inception of the business, the owner may count among these rights the ability to share in the profits generated by the business, whether in the form of
Employers, FICA Taxes & Deferred Comp: “When Was I Supposed to Withhold?”
Nonqualified Deferred Compensation
In general, a nonqualified deferred compensation plan allows an executive to defer the “receipt” and income taxation of a portion of his compensation to a tax period after the period in which the compensation is earned (i.e., the time when the services giving rise to the compensation are performed).
The payment of
Hot Partnership Assets & Installment Sales
Installment Reporting: Sale of Corporate Stock v. Sale of Partnership Interest
Most advisers understand that if a taxpayer sells his or her shares of stock in a corporation in exchange for a promissory note, the taxpayer generally can defer recognition of the gain realized on the sale until principal payments are received on the note
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
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
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