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Taxes, liability and administration

You and a friend are considering forming a business organization to manufacture and sell widgets. You suspect that the company will show a loss during the first two years of operation. You also know that another manufacturer of widgets has suffered three product liability lawsuits totaling $300,000 within the past year. Additionally, you are married to a doctor who makes a very high annual income.

What form of business organizations should be selected under the circumstances? Fully explain why you selected this form?

Discuss: taxes, liability and administration.

Solution Preview

I would open a Limited Liability Partnership with myself being a limited partner.

Tax Implications: The LLP will not be taxed. All profit and losses will flow through me and I would be taxed at an individual level. Since the LLP is expected to suffer losses in the first two years, I would benefit from these losses. Since my spouse is a doctor with a high income, these losses will reduce my total income ...

Solution Summary

The solution goes into a great amount of detail about the tax and liability implications of the different business structures. The solution also recommends the ideal business structure for the situation given in the questions. Overall, an excellent response.

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