Tax Consequences of Business Formation

What are the tax consequences of business formation, in general?

When starting a business, you must consider a number of factors. One very important factor is taxation. Although business tax planning is a complicated area, the first step is to understand the tax consequences when the business is formed. Typically, the business owners will transfer cash or property to the business in return for an interest in the business. This exchange will have an impact on the tax basis for the owner and the business. Although myriad business entities exist, the following types will be covered here: C corporations, S corporations, partnerships, sole proprietorships, limited liability companies (LLCs), limited liability partnerships (LLPs), limited partnerships (LPs), and professional corporations (PCs).

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