Article on Tax Planning for Transitions in S Corporations

Daniel H. McCarthy (Attorney, Texas), Steven B. Gorin (Partner, Illinois), & William I. Sanderson (Associate Attorney, Virginia) recently published an article entitled, S Corporations: Tax Planning for Transitions, 47 Prob. & Prop. July/August 2012. The introduction to his article is provided below: 

Taxpayers desiring to start a new business face a variety of entity options for state law purposes and also have flexibility for the federal income tax classifications of the entity. Taxation as an S corporation continues to be a popular option for taxpayers forming a new business.

In addition, taxpayers may have formed state law corporations many years ago before the enactment of subchapter S and may not have been eligible to make such an election because they had too many shareholders, shareholders that were not eligible to own stock in an S corporation, or a capital structure that was inconsistent with an S corporation’s requirement that all shares of stock have the same distribution and liquidation rights. These taxpayers may find an S election to be advantageous to eliminate the double level of taxation associated with C Corporations.