Ronald J. Cappuccio, J.D., LL.M. (Tax)

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Innovative Strategies For Winning Tax Controversies, Business Structuring And Estate Planning

When Are Limited Liability Companies A Poor Choice?

  • Non-pass-through entities. When there is a need to retain income in the business, a “C” corporation is better than an LLC.
  • Phantom income problem. When a business is retaining its earnings to invest in machinery and equipment, pass-through entities such as an LLC could result in phantom income. A “C” corporation is a better choice.
  • Pension and retirement plans. A “C” corporation is better for many retirement plans. In addition to maximizing retirement plan benefits, which include borrowing from such retirement plan, a “C” corporation would probably be better than an LLC.
  • International Businesses. Although for management purposes an LLC may be appropriate, the foreign government may have unfavorable tax treatment.