What is the optimal tax entity for the business

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Reference no: EM131717206

Choice Of Entity

Problem Set

Problem #1: Individual A desires to form a new business that will operate a beauty salon. A will be the sole owner and will be active in the business. The business will have several part-time employees and is not expected to experience substantial growth. A expects the business to generate approximately $100,000 of income per year. A will contribute various business assets to begin operations and the business will lease its real estate from a landlord. What is the optimal tax entity for the business?

Problem #2: Individuals A, B, C and D desire to form a new business entity that will create and develop intellectual property related to the pharmaceutical industry. The business will be a high risk venture, which could experience substantial growth. Individuals A, B, C and D will provide an initial round of investment capital in the form of cash to begin operations. Depending upon the success of the initial operations, additional investors may be sought for future rounds of investment. What is the optimal tax entity for the business?

Problem #3: Individual X is considering taking on a position with a new start up company. Individual X is attracted to the new job due to the potential the company has to experience explosive growth in the future. The company has limited cash flow at the present time, but the company's owners are willing to grant an equity interest to Individual X. From Individual X's perspective, what is the optimal entity type and equity structure for the company and for X?

REMEMBER: Two of the most important considerations in selecting a form of organization for an entity are: (1) Avoiding unlimited liability; (2) Avoiding double taxation.

Attachment:- Entity Decisio nSummary.rar

Reference no: EM131717206

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