It would be my advice for Mr. Jones to not buy the stock because of the liability of current and future tax obligations which Mr. Jones would incur from the purchase of the stock. Since the tax identity of Smithon corporation would have not ceased, it is not a favorable purchase for Mr. Jones. Ina a case where the tax identity of a firm does not cease not to exist, the tax aspects will remain the same and so will the existing tax schedule. So in this case it would mean that Mr. Jones would not be allowed to change the financial year to end on December 31. The buyer in cases where he can’t change the legal entity is in a non -benefice situation, the buyer is limited to follow the current tax basis on the company’s assets even if the buyer paid more for the
Other capital re-organizations alternatives involve significant tax liability and considering the present state with Seagate being a public company, tax liability will result in loss of wealth for the shareholders since it involves corporate taxes as well as personal tax liability. The stock of Seagate Inc., is experiencing an adverse value gap such that the market value of the corporation is significantly lower than the asset value. The management have evaluated different options to re-state the stock price to represent the fair value of the group. These includes divestment, discontinue and other capital restructuring strategies resulting in considering an eventual swap with VERITAS Ltd. stock for Network and Storage Management Group. Seagate management have a fiduciary duty to protect the wealth of shareholders and ensure a fair offer tendering hence they have narrowed down to opt for this two-staged LBO transaction.
An corporations liability is limited to its assects, so the owner or the shareholders are protected from personal claims unless they commit fraud. Now because Tom did not follow the law of an incorporation by having corporate minutes his company has commited fraud. The court will see a case of fraud and In my opinion will lose the
Separate Transaction reasoning: There are three main reasons why the Veritas shares should be divested in a separate transaction. The first one is to escape tax. Separating the deal in different transactions, and using a tax-free stock swap, implies that stocks are not sold ( if company as a whole were to be sold ) , therefore escaping from a huge tax liability bill. The second one it’s obvious. The value to the separate transitions would be higher than a combined one.
Fewer companies are willing to enter the market because of the SOX requirements that make going public too costly. Plus, the maintenance required to stay public is too expensive for smaller companies, forcing companies to look elsewhere to raise capital. Rising costs persuade large numbers of companies to exit the public markets to sidestep SEC regulation, creates two problems. First, the overall economy could suffer because corporations limit investment projects due to the higher-cost sources of capital to fund potentially new operations. Second, financially stressed companies that go dark are the very companies’ shareholders need to monitor usually and where transparency is most important.
As a C-corporation the business, not the owner, would be held liable for any financial damages. Any accidents involving employees or customers would be the responsibility of the corporation to settle. Financially speaking incorporating is the best option because as a sole proprietorship the owner is currently paying a much higher tax rate versus the corporate tax rate. With the tax code being different for corporations there is better profit retention and security. The client also mentioned the issue of partnership and the selling of stock in order to expand the company.
But the amount that a manager can hold stocks should be limited because the ownership would be split in this way as it is not good for Brazos itself to decrease its ownership. The real estate subsidiary is a good idea that Brazos could purchase it as an asset and they can still control the operation and employees. Since Brazos can not only buy tangible assets but also intangibles asset which is Goodwill $34.7 million. Brazos
In my opinion, it is not ethical for a CPA or CPA firm to help companies “manage” their reported earnings and financial condition. The framework of Ethical Reasoning comprises five parts: Opinion, self-interest, consequence, duty, and character. This framework can help us better analyze this matter. First, opinion puts self-interest aside to see into this matter. If a CPA or CPA firm first serves as a consultant then as the given entity’s auditor, it is auditing its own work.
· Liability-A C Corporation has limited liability in that it is seen as a separate entity from the owners, which in turn protects their personal assets from being taken to pay for the company’s debt or liability losses. As with the other business entities, insurance can be purchased to shield the assets from being taken due to a liability loss. · Income taxes-Corporations are taxed twice. They are first taxed on the profits made by the corporation itself then the profits to the shareholders, also known as dividends, are taxed. · Longevity-The dissolution of a C-Corporation can occur because of a shareholder becoming disabled or dying, the failing profits of the company or because they can not agree on the direction or handling of the company.
Are there any disadvantages? Please explain. Companies limited by shares Advantages Disadvantages Members have limited liability Expensive to set up and maintain Separate legal entity Limited management roles for members Transferability of shares Control of the company can change Continuous life Strict reporting and disclosure requirements Taxation benefits Penalties imposed on defaulting officers Easier access to capital More onerous legal compliance issues Partnerships Advantages