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Michigan lawmaker proposes tax law for new business entities

Keeping up to date on the latest changes in business laws and regulations is important for any entrepreneur looking to form a new business. Some of these changes can affect how certain types of business entities are taxed. One lawmaker from Michigan is currently promoting a change in the law that will alter the tax liabilities of some business partnerships. Anybody who is looking to start a new business will want to pay attention to the details of the proposed changes in tax law.

Under one option proposed by the congressman, partnerships such as private equity firms and hedge funds will be more limited in their ability to allocate tax benefits and income to their members. The proposal would get rid of the separate rules pertaining to partnerships and those managing closely held S corporations. One unified set of rules will be created which would merge the features of both current sets of rules.

The lawmaker also offered a second option that would revise how small businesses are taxed. The second option proposes a more incremental approach to changing tax laws for partnerships and S corporations. It would also extend expensing rules and enable businesses to use cash accounting. This more incremental approach would also streamline deductions for new businesses.

If any of these two options proposed by the lawmaker from Michigan becomes enacted into law, it may affect the tax planning for those looking to start a new business. It may even prompt an entrepreneur to change the type of business entity he or she forms. However, whatever type of business entity an entrepreneur chooses, he or she will have to make sure to follow the proper legal procedure. Each business entity requires specific types of planning and documentation, and the right advice may be the best recipe for success.

Source: Bloomberg Businessweek, " Camp Offers Option That Would Revamp Partnership Tax Law ," Richard Rubin, March 12, 2013

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