The structures you choose for conducting your business and financing your operations can dramatically affect your tax obligations. Fortunately, recent changes to the tax laws have made business entity choices seamless. You can operate as a limited liability company or subchapter S corporation and enjoy the tax benefits generally associated with partnerships and sole proprietorships. You can use the "check-the-box" election to gain cross-border tax advantages without otherwise affecting the basic economics of a transaction. You can choose a financing arrangement that involves issuing preferred stock or debt or engaging in leveraged lease transactions.
Caplin & Drysdale attorneys has significant practical experience utilizing the business entity and financing provisions of the tax laws to fashion tax efficient strategies. Some of our attorneys were involved in the development of these provisions before joining the firm. Others are at the forefront of their evolution, implementing them in cutting-edge, real life transactions. We are counsel to domestic and multinational corporations, big and small businesses, partnerships, and subchapter S corporations. For these clients, we help plan new business structures, execute structural changes, and design tax efficient transactions under these structures.
Representative Engagements
- A manufacturing company needs to raise capital for expansion but cannot obtain traditional bank financing at affordable rates. The chief financial officer is showered with investment bankers' proposals for leveraged leases, participating loans, preferred stock deals and the like. The CFO feels comfortable analyzing the financial details of these proposals but cannot assess their likely tax consequences.
Result: Caplin & Drysdale reviews each of the proposals and provides an analysis of the important tax questions presented, the likelihood of prevailing on the important issues if ever challenged by the government, and the financial consequences of losing on one or more of these issues. After helping the CFO choose among the possibilities based on a realistic assessments of their respective tax risks, Caplin & Drysdale negotiates the tax-sensitive provisions of the financing documents and appropriate collateral documents, including a tax indemnification agreement.
- An S corporation wishes to expand its business into a European country with limited liability and without being directly subject to foreign tax.
Result: Working with foreign counsel, Caplin & Drysdale selects a form of business vehicle subject to direct taxation in the foreign country but eligible to distribute profits without a withholding tax. A "check-the-box" election is made with respect to the foreign vehicle so that the shareholders of the S corporation will be eligible for a foreign tax credit with respect to foreign taxes paid by the new entity. Because the foreign vehicle requires two investors, Caplin & Drysdale also advises the S corporation to form a wholly-owned LLC that will be disregarded for U.S. tax purposes but treated as a separate entity in the foreign jurisdiction.
- A young entrepreneur wants to create a company to develop her idea for a promising new product. She has located individual investors who are willing to provide the seed money and is looking for experienced counsel to structure the deal for her.
Result: Caplin & Drysdale helps the entrepreneur refine her financial projections for the project and choose the limited liability corporation structure, and then negotiates the terms of investment. When an agreement among the parties is reached, Caplin & Drysdale drafts all the necessary documents, including the limited liability company agreement for the new company, appropriate securities disclosures, and all required purchase and investment documents.
Our Services
Consult us for counseling on and drafting of:
- Partnership Agreements
- Limited Liability Company Agreements
- Subchapter S Corporation Documents
- Purchase and Sale Documents
- Financing Documents
- Compensation Planning
- Tax Analyses
- Requests for formal Tax Opinions
- Securities Disclosure Documents
- Specialized Entities (e.g., REITS and REMICS)
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