Entering or Leaving a Business

Tax consequences frequently come into play when a person joins or leaves an existing business, and the manner in which the transaction is structured can determine whether these consequences are favorable or unfavorable. For example:

• An employee who receives stock options may realize dramatically different tax consequences than a colleague who receives so-called "restricted stock."
• An investor who receives straight equity in a startup business may realize very different results than the same investor receiving convertible debt.
• A physician or other professional acquiring an interest in an established practice may pay much more if he simply purchases stock than if the transaction is structured with taxes in mind.
• An individual selling stock in an S corporation can face significantly different tax results depending on whether an election is made in connection with the sale.
• An individual who retires from a partnership can face vastly different tax consequences depending on whether the transaction is treated as a "sale or exchange" rather than a "liquidation."
• An individual purchasing an interest in a partnership can greatly improve his tax position by making a simple election.

In all of these situations and many more, the parties can lower the total cost of the transaction through effective tax planning. At Flaster/Greenberg, this is an integral part of our practice.