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  • Casual Articles - Tax Traps To Avoid When Incorporating a Business

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    As a general rule, you can incorporate your business with no tax cost as long as you contribute all of your business’s assets and liabilities to a corporation you control.

    A sole proprietor who incorporates his or her business, therefore, should be able to incorporate tax-free. So should a partnership. And a limited liability company that makes an election to be treated as a C corporation or as an S corporation should also be able to make these “incorporation” elections tax-free.

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    A sole proprietor who incorporates his or her business, therefore, should be able to incorporate tax-free. So should a partnership. And a limited liability company that makes an election to be treated as a C corporation or as an S corporation should also be able to make these “incorporation” elections tax-free.

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    ess, therefore, should be able to incorporate tax-free. So should a partnership. And a limited liability company that makes an election to be treated as a C corporation or as an S corporation should also be able to make these “incorporation” elections tax-free.

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    hat makes an election to be treated as a C corporation or as an S corporation should also be able to make these “incorporation” elections tax-free.

    But all rules, including general rules, can be broken. And when it comes to

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    corporation” elections tax-free.

    But all rules, including general rules, can be broken. And when it comes to incorporating your business, three big tax traps await unwary business owners, managers and entrepreneurs.

    Incorporation Tax Trap #1: Goofy Liabilities

    If a shareholder transfers liabilities to a newly minted corporation and there’s no business purpose to support all of the transfers or if the liabilities are transferred to avoid taxes, then all the transferred liabilities are treated as boot. And that can be a disaster because the boo

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