Entity Choice, Formation Structuring, and QSBS Planning

This chapter covers the early planning decisions that shape an entity’s long-term tax profile. TCP questions in this area compare structures, examine tax-deferred formation rules, and ask how ownership design or QSBS treatment changes the recommendation.

In This Chapter

• Choosing Among C Corporations, S Corporations, Partnerships, and LLCs compares tax regime, liability profile, and ownership constraints across the main entity options.
• Section 351 and Section 721 Formation Planning with Built-In Loss Property explains tax-deferred formation transfers and their limits.
• Special Allocations, Ownership Classes, and Tax Attribute Shifting covers how structuring choices affect income and control.
• Qualified Small Business Stock Exclusions and Exit Planning addresses QSBS eligibility and how early structuring affects the eventual exit.

How to Use This Chapter

• Read the entity-choice and formation lessons together because structure selection and contribution mechanics usually belong to the same planning conversation.
• Save the QSBS lesson for after the formation rules are clear, since it is often an overlay on the initial entity-choice decision.

In this section

• Choosing Among C Corporations, S Corporations, Partnerships, and LLCs
  Entity-choice comparison of tax regime, liability profile, ownership limits, and self-employment tax effects.
• Section 351 and Section 721 Formation Planning with Built-In Loss Property
  Formation-planning rules for tax-deferred transfers under Sections 351 and 721, including built-in loss constraints.
• Special Allocations, Ownership Classes, and Tax Attribute Shifting
  Planning use of special allocations and ownership classes to shift income, deductions, and control rights.
• Qualified Small Business Stock Exclusions and Exit Planning
  QSBS planning covering holding periods, eligibility tests, exclusions, and exit-structuring implications.