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Estate Planning

A. In terms of minimizing tax liability, how would estate planning differ from a partnership to a corporation?

B. For estate planning purposes, what are the advantages of setting your business up as a corporation versus a partnership? Defend your response.

C. Describe Target cororation’s succession plan and whether or not it aligns with Target corporation’s vision.

D. Based on your responses, what estate planning strategy would be most effective in minimizing tax liability? Why?

Answer 1

Part A:

Partnership and corporations are two different forms of businesses and obviously the tax provisions applicable to these different forms of businesses are completely different. The estate planning in case of partnership differs due to the fact that though the business is separated from the personal lives of partners however, still the partners are liable for the actions of the other partners. Whereas corporations have separate legal identity thus, the owners of business are completely different from the corporation.

Part B:

In case of corporation the business is completely a different entity from its owners thus, the actions of business are only the actions of business. Thus, incorporating a corporation for business has number of advantages including the following:

1. The owners are separate from the corporation.
2. The business can borrow and lend in its own name.
3. The business can hold assets and liabilities in its own name thus, the assets and liabilities of business in no case will be shifted to the owners.

Part C:

A corporation should have a proper succession plan in order to transfer the assets and liabilities of the corporation to the successor correctly. A target corporation should have a succession plan ready and signed all the time thus, in case of any urgency such succession plan should be referred to take important decisions in relation to the succession of business. The succession plan should have proper terms and conditions that shall be understandable easily without any problem. The succession plan should be prepared in such a manner to ensure that the tax liability is minimum.

Part D:

In order to minimize the tax liability it is important to find a proper balance in estate planning. Considering all aspects of various nuances it is clear that corporations will help to reduce the tax liability to the minimum extent possible. This is not only because the corporations have a separate legal status different from its owners but also for the fact that the no assets of the owners will be attached in case the corporation goes bankrupt.