Choice of Entity After 2017 Tax Reform: Avoiding Tax Pitfalls in Operations, Ownership Changes, Exit Strategies

Capital vs. Profits Interest, Allowable Deductions, Distributions, Exclusions, and Other Planning Considerations

Note: CPE credit is not offered on this program

Recording of a 90-minute CLE webinar with Q&A

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Conducted on Wednesday, January 29, 2020

Recorded event now available

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Course Materials

This CLE course will provide practical guidance to counsel and advisers on the challenges in the choice of a legal entity under the 2017 changes to the tax laws. The panel will discuss key provisions of the new tax law to be considered in entity selection, and avoiding the tax pitfalls in operations and asset or stock sales. The panel will also discuss capital vs. profits interest, allowable deductions and exclusions under the changed tax law, exit strategy planning, and other critical considerations for effective business planning.

Description

The 2017 tax legislation made sweeping changes to the tax code, impacting decisions on entity selection upon formation or potential conversion to another entity form. Choosing an entity's legal structure is complicated with new tax laws that include a reduction in the corporate tax rate, a new qualified business income deduction for pass-through entities, new rules on carried interest, and a variety of limitations for counsel to consider.

Choice of entity considerations for startups must involve a planning approach to structuring the company that will enable it to achieve its financial and operational goals. For those that intend to issue stock/options, raise capital, spin-off separate business lines, or deal with the particular issues of cashing out or business succession, the choice of entity at the beginning can have significant tax and operational impact on the business. For pass-through entities that have to navigate the 20% tax deduction and its many exceptions, a company's current or intended activities must be evaluated. For others, a conversion to a C corporation should be an available option as well.

State law is also an important consideration when choosing a legal entity. Some states have different tax rates for various entities and are taking differing approaches on how closely they conform to the new federal tax law for state income tax purposes. The complexities involved in entity selection or conversion require counsel to guide business owners to set up the right type of entity to meet initial goals with the flexibility to change the entity form as the business evolves. Failure to do so can create avoidable tax difficulties for business owners in the operation, liquidation, or succession of the company.

Listen as our experienced panel provides a detailed examination of the tax planning considerations and opportunities in advising clients on choosing a business entity.

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Outline

  1. Key provisions of the 2017 tax law impacting choice of entity decisions
  2. Impact on business operations and available planning opportunities
  3. State law considerations in choice of entity
  4. Treatment of distributions based on the entity form
  5. Consequences and potential opportunities in changing entity form
  6. Effective exit strategy techniques to avoid pitfalls stemming from entity form

Benefits

The panel will review these and other critical issues:

  • Tax and operational considerations for entity structuring
  • Planning opportunities and allowable deductions and exclusions under new tax law
  • State law considerations and planning opportunities
  • The impact of different entity forms in structuring compensation
  • Capital vs. profits interest and treatment of distributions based on entity structure
  • Implications and opportunities in changing entity form
  • Exit strategy techniques and avoiding unintended operational and tax consequences

Faculty

Markey, Susan
Susan Markey
Attorney
Maslon

Ms. Markey represents clients in general corporate and taxation matters. Her experience includes assisting clients with...  |  Read More

Sutin, Joshua
Joshua A. Sutin
Shareholder
Chamberlain Hrdlicka White Williams & Aughtry

Mr. Sutin helps clients unravel complex legal and business issues related to employee benefit plans, tax-exempt...  |  Read More

Tarr, Alan
Alan J. Tarr
Partner and Chair, Tax Department
Loeb & Loeb

Mr. Tarr's practice focuses on tax planning for business transactions, including acquisitions and dispositions of...  |  Read More

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