taa wrote:
I'm going to give you a little ripping first on that 75-shareholder notion. Get a refresher on the old college Business Entities course, will ya. There are other options out there if you are dead set on "pass-throughs," although I can make a case where you actually would be overall better off with "double" taxed entity. See, I can't envision you being showered with dividends of any significance in the first few years the biz exists, so stop worrying about taxes, at least, until you actually see a big fat bottomline. When that happens, you can easily liquidate by merging into a "pass-through" shell. Or, just start with an LLC, a two page form in IL.
Great commentary, and I appreciate your analysis.
You are right that entity type is not the most important hurdle - yet intellectual curiosity sparks me to continue in this vein.
I am aware of the distinct probablility of a loss in the initial stages (and thus the improbablility of paying dividends right away). I am also aware that many growing entities elect to change corporate format at a later time. I just wanted to get the drop on that subject (so later changes could be minimized) if many, many people were to participate in ownership.
Now, with an LLC, which is also "pass-through", don't all of the members have to have an equal share/ownership %? This might make that entity-type inapplicable here. What other "pass-throughs" are you aware of besides LLCs and S-Corp? Other entity types like LP or LLP might be applicable to the present scenario, but, off the top of my head, investors in that schematic would not be able to vote or take any part in management, correct?
You are right, I should know all of this, I have learned it all before in-depth, but I am a bit rusty with my analysis of these alternate scenarios, and I am always interested in a "refresher" by an esteemed colleague.
Thanks, and please comment.