I. Introduction
Colson, Inc. is a successful company with eight shareholders, six of which are individuals and two which are family limited partnerships. None of these shareholders are related and only one of them currently works for the company. The shareholders have become frustrated with the double taxation imposed upon them by the company’s C corporation status and would like to explore the potential of converting to a pass-through entity such as an S corporation or LLC. They have asked our firm to advise them on this possibility.
II. Eligibility Requirements for Conversion
For a Subchapter C corporation to be eligible for an S corporation election it must be a “small business corporation.” I.R.C. § 1361(a). To be considered a small business corporation, it must be a domestic corporation and meet four distinct requirements. I will discuss each requirement below and apply it to the facts provided our firm by Colson Inc.
The first requirement is that the corporation must not have more than 100 shareholders. I.R.C. § 1361(b)(1)(A). Colson meets this requirement because it has only eight separate shareholders. The company will not need to redeem or purchase any stock to facilitate its ability to comply with this requirement.
Secondly, the corporation must have only shareholders who are individuals, estates, or certain types of trust or tax exempt organization and are not a partnership or corporation. I.R.C. § 1361(b)(1)(B). Colson has eight shareholders, six of whom are
Whether a C corporation that has preferred stock and common stock with both voting and nonvoting rights, eight shareholders among whom there are a Swedish individual and Plantation Sugar partnership, may elect to be an S corporation, under section 1361(b)(1)(B), 1361(b)(1)(C) and 1361(b)(1)(D)?
They can have as many shareholders as they want to, there is no limit and they can raise large sums of capital.
1) Section 351: Since Individual will be in control (80%+ ownership) of future corporation, he will not incur a taxable event
(a) The Court of Chancery, upon application of any stockholder, may appoint 1 or more persons to be custodians, and, if the corporation is insolvent, to be receivers, of and for any corporation when:
| If all members of a new foreign entity have limited liability, the entity is classified as an association taxed as a corporation.
A1d: A C-Corporation is a business form in which the ownership and the company are seen as legally separate entities.
The owner of Hansson Private Label (HPL) must determine whether or not to accept an aggressive expansion project that would preclude the company from pursuing any alternative investment opportunities for several years. The investment, if successful, would offer numerous benefits to the company, capturing greater market share, strengthening relationships with major customers, crowding out competition and increasing firm value. Nonetheless, the decision carries significant risks and could lead to a substantial decline in firm value, if not bankruptcy, should any number of variables prove unfavorable to HPL. Moreover, the project relies heavily on a contract with a single large
Companies strive to choose not only the best marketing channels, but also the best profitable channel. A profitable channel can promote and successfully sell out of a product that might not otherwise turn a profit for their producers (New Charter University 2015). “The calculations from the cost accountant for the retail segment accounts were 60 percent of sales, and for the foodservice segment accounts were 40 percent. The cost accountant believes that both channels are profitable. The accountant also believes that the company achieves an overall average gross margin of 60 percent on its sales (Bowersox, D. J., Closs, D. J., Cooper, M. B.,
If the buyer is considering the purchase of a business currently conducted by a corporation, it ordinarily will be in the buyer’s interest to buy the business assets, not the stock, of the corporation, even if the buyer plans to incorporate the business. (The buyer can organize a new corporation, which would buy the assets from the selling corporation.)
"It has been a fundamental principle of Irish company law since the decision of the House of Lords in Salomon v. Salomon and Company Limited [1897] A.C. 22 that a company registered under the Companies Acts is an artificial legal entity separate and distinct from the members, whether natural or corporate persons, of which it is composed."
* unity of purpose and focus under a common corporate strategy (further supporting the firm’s strategy as it relates to acquisitions and divestitures);
1. Evaluate the economics of Gulf's exploration and development program in net present value terms. How do Gulf's outlay for exploration and development compare to cash returns Gulf generates from these activities.
Once a company is registered and the certificate of incorporation is issued a company is treated as a separate legal entity otherwise referred to as the ‘corporate veil’ which identifies the shareholders of a company and the actual company as two separate legal entities. The famous Salomon case which I will refer to in more detail was an important case in establishing the fact that a company is a separate legal entity and different from its members. This case determined the course of modern company law and the nature of private limited companies. Under certain circumstances the courts may have to lift the corporate veil and ignore the separate entity principle and I will also be looking at some of those types of cases and how they have been dealt with.
Are the departments working well with each other? This part of the model will discuss if the operation of the company is efficient.
The Ford Motor Company fell into a trap of greed that resulted in the loss of many human lives. Before the disaster of the Pinto fires, Ford had a reputation as being the safety pioneer in the automobile industry with additions such as the seat belts even raising awareness of their safety. However, as the invention of small cars began to take emerge Ford began to lose market shares to the foreign market causing Ford to construct a small compact to satisfy this emerging market. Ford’s stance on “safety doesn’t sell” resulted in over 400 burn deaths. The cases involving the explosion of Ford Pinto 's due to a defective fuel system design led to the debate of many issues, most centering around the use by Ford of a cost-benefit analysis and the ethics surrounding its decision not to upgrade the fuel system. The issue is should a risk/benefit analysis be used in situations where a defect in design or manufacturing could lead to death or seriously bodily harm, such as in the Ford Pinto situation?