“Limited Liability”

The experienced or well-informed investor recognizes that there is an element of risk in every business venture. They understand that the cash or other property they have contributed to the venture may be lost for any number of reasons – an economic downturn, a very competitive industry, the incompetence of officers, an adverse

The Corporate “Shield”

Ask any shareholder of a closely held corporation whether they may be held liable for the tax obligations of the corporation, and they will likely respond “of course not, that’s why we established the corporation – to benefit from the limited liability protection it provides.”

Some of these shareholders will be surprised

In general, the creditors of a corporation cannot recover the corporation’s debts from its shareholders—the shareholders enjoy the benefit of limited liability protection as a matter of state law. Among the corporate liabilities from which shareholders are usually shielded is the Federal income tax imposed on a corporation’s taxable income.

There are a number of exceptions to this general rule, however – some of which are better known than others – including the ones described below.
Continue Reading Shareholder Liability For Corporate Income Tax?

See yesterday’s post for the background on the liability of the minority shareholders discussed today.

Transferee Liability

Taxpayers argued that the IRS’s installment agreement with Corp cut off their transferee liability, and that the IRS’s failure to exhaust its collection options against Corp precluded the IRS from seeking to recover from them as transferees. They

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