The Tax Consequences of Entity Formation and Dissolution
Tax law often plays a key role in the form chosen for a new business. Companies that change their business structure, or dissolve the business altogether, must understand the tax consequences of any change in entity status.
At the Law Office of Williams & Associates, P.C., we represent California business owners on a broad spectrum of tax issues, ranging from tax audits and appeals to collections, liens, and levies. We can advise your organization on how to begin, change or end your business without incurring unintended tax results.
How Business Structure Influences Taxes
Depending on the structure a new or ongoing business chooses, taxes may be assessed primarily to the individual(s) or the business. Here are a few examples:
- Sole proprietorships and general partnerships place the tax burden on the individual taxpayer(s).
- Limited liability companies (LLCs) are considered separate taxable entities but utilize “pass-through” taxation, which means that the individual owners are responsible for paying taxes that are due.
- C corporations, considered the “traditional” corporation structure, are taxed at the corporate level — although wages and dividends that individual owners receive are also taxable.
- S corporations, like LLCs, have the “pass-through” option so that the entity is not taxed at the corporate rate.
An attorney with our firm can advise you on the most sensible tax structure for your business, as well as what steps to take to change structures or dissolve your business.
Start or Keep Your Business on a Solid Financial Footing
Our firm’s lawyers have focused their practice on tax law and stand ready to advise you on state and federal tax matters affecting your business.