Specializing in Mergers and Acquisitions, Entity Formation, Business
Contracts, Entity Reorganization, Capital Formation and Business Tax
Putting each piece of the entity puzzle in the right place is
important in selecting the best business entity. This brochure provides a brief overview of the basic issues and facts regarding
selection of the appropriate business entity. Why incorporate? Should your
company be a corporation, limited liability company or a limited partnership? If you
incorporate, should you elect Subchapter "S" status? What does
"limited liability" really mean? Will the form of entity that looks best today be the best entity for the
The materials in this brochure are excerpts from materials used by Mr.
Neu in advising clients on how to organize or reorganize their business. This brochure should not be relied
upon as rendering legal advice.
The goal is to achieve
"limited liability" without adverse tax consequences. Limited
Partnerships, Corporations and Limited Liability Companies provide
"limited liability." Owners, however, cannot escape total liability as noted below.
View List Of Entity
"C" Corporation Advantages
1. Owners can deduct:
A. Health insurance premiums.
B. Medical reimbursement costs.
C. Premiums on up to $50,000 term life insurance.
2. Pension plan:
A. Owners can borrow from the plan.
B. Easier to qualify for lump-sum distribution.
3. 50% of gain excluded on sale of
"qualified small business stock." Top^
1. Avoiding double taxation by
"zeroing out" the corporate income by paying salaries to the active owners will not be acceptable to
non-salaried / passive owners and may result in "unreasonable
2. When the business is sold, an asset sale (versus a stock sale)
could result in "double taxation."
"S" Corporation Restrictions & Conditions
1. "S" corp. can not have more than 75 shareholders.
2. Only natural citizens that are U.S. citizens or resident aliens
(except certain qualified estates and trusts) may be shareholders.
3. Must ordinarily adopt a calendar year.
4. "S" corp. can not have more than one class of stock.
(1) California "S" corporations are subject to a 1.5% state income tax
and LLC's pay $800 per year plus a fee based on gross sales. The fee
starts at $500 on gross sales from $250,000 to $500,000 and increases
to $4,500 if gross sales are equal to or greater than $5,000,000.
Comparison Chart ]
Limited Liability Companies
Many private companies will find that the Limited Liability Company
provides alternatives and flexibility that cannot be obtained in an
"S" corporation. The scale sets forth the advantages and
disadvantages of an LLC versus an "S" corporation. The size of each
box indicates each itemıs relative importance, however, the facts of
each case will have a significant impact on the final analysis.
Forming the right kind of business entity will help provide a solid
foundation to achieve lasting financial benefits.
Advantages/Disadvantages Chart ]
Roger L. Neu
This brochure was prepared by the Law Offices of Roger L. Neu, Inc.
Mr. Neu specializes in privately held company mergers and acquisitions. With over 20 years of experience, Mr. Neu
has been involved in successfully completing mergers and acquisitions for over
150 privately held businesses. Mr. Neu was a CPA with Price Waterhouse, later attended Loyola Law
School, graduating with honors, and worked with a large Orange County law firm for four
years before establishing his law firm in 1982.
Law Offices of Roger L. Neu, Inc.
Specializing in Mergers and Acquisitions, Entity Reorganizations,
Business Contracts, Capital Formation and Business Tax Planning
Phone (949) 863-1700 | Fax (949) 863-1701 | 2040 Main Street, 9th Floor | Irvine, CA 92614