Tax considerations for early-stage and emerging growth companies
Posted by
Tom Aiken on Wed, Aug 10, 2011 @ 08:33 AM
Tax considerations for early-stage and emerging growth companies
-
From the beginning owners should consider the tax ramifications of forming a C corporation, S corporation, limited liability corporation (LLC), partnership, or other form of legal entity. Each entity has its own set of tax benefits and limitations that may affect the growth and strategic objectives of the company.
-
Accounting methods vary based on the growth stage of a company. An early-stage company may use a cash basis financial statement for managing the business, and an accrual basis financial statement for banks and investors. Tax returns may use either method, within certain limitations. Accounting for transaction costs, deferred revenue, and depreciation are a few areas to consider.
-
Research & development tax credits can be significant deductible expenses. Tax credits are available for certain research activities however a thorough analysis of the creditable activities are required by the IRS guidelines.
-
Forms of compensation and benefits such as salaries, commissions, bonuses, equity compensation such as unrestricted and restricted stock, stock options, employee stock purchase plans, qualified pension plans, and profit sharing all have an impact on taxes.
-
State and local tax issues must be considered. There can be tax incentives and credits such as enterprise zones and other tax minimization strategies around location of activities and intercompany transactions. The issue of nexus, regarding sales and use taxes is something that needs to be reviewed.
-
Mergers, acquisitions, joint ventures, and other transactions need to be analyzed to maximize deductions of goodwill and intangible assets acquired in a tranaction. Companies should also plan for the best tax treatment in the purchase or sale of assets for stock.
-
Net operating losses (NOL) and other tax credits carry forwards into future years can be impacted by changes in a company's ownership structure. Limitations may restrict the amont of NOL than can be utilized and potentially elimanate the benefit of a bonus depreciation deduction.
These are some of the tax considerations DGK Group can assist you with in making the right decisions and planning for the future.
Call us at 215-682-9047 and learn more about us at www.dgkgrouppc.com