Client Services / Tax / Pass-Throughs

Pass-Throughs

Our Pass-Through Entity Tax Practice uses partnerships, S corporations, limited liability companies (LLCs) and other pass-through entities to assist clients in tax planning. A pass-through entity can be used to avoid double taxation, to allow the owners of a business to obtain the full benefit of any tax losses or tax incentives and as a device to minimize the tax impact of any asset acquisition or disposition. We utilize the tax flexibility inherent in particular client partnership and LLC structures to minimize adverse tax consequences and design and implement transactions that make the most of that flexibility.

ORGANIZING NEW BUSINESSES
New businesses and joint ventures (even subsidiaries of C corporations) should often be organized as LLCs or other pass-through entities. Pass-through status minimizes income taxes on distributed profits from operations, permits tax-efficient acquisitions, dispositions and ownership changes and maximizes after-tax sale proceeds to the owners. We work with clients to design pass-through structures that meet their business and tax objectives.

INTERNATIONAL JOINT VENTURES
We have structured international joint ventures in nearly every major industrial country, as well as in many developing countries. In conjunction with our International Tax Practice, we are familiar with business entities in use around the world and with tax issues that arise out of cross-border transactions involving pass-through entities.

ACQUISITIONS, DISPOSITIONS AND BUYOUTS
One of the important aspects of our Pass-Through Entity Tax Practice is our utilization of pass-through entities in acquisition, dispositions and buyout transactions. This practice includes the tax-efficient structuring of transactions involving pass-through entities. Another major focus of our Pass-Through Entity Tax Group is the utilization of partnerships and LLCs as a vehicle to obtain favorable tax treatment for corporate asset acquisitions and dispositions. These techniques will frequently allow the corporate seller of an asset to "cash out" of the value of its assets and recognize book gain while deferring the tax consequences of the transactions. This practice involves representation of both buyers and sellers in transactions in which pass-through entities can be used to achieve tax-minimization goals that could not otherwise be obtained.

START-UP COMPANIES
We structure start-up companies and leveraged buyouts that begin in partnership or limited liability company form with an eye to incorporating and making an initial public offering. We are experienced in dealing with the issues such companies face, including structuring institutional venture capital equity financing with options and warrants and using equity to compensate and provide incentives to key employees.

S CORPORATIONS
We advise on the establishment, operation and acquisition and disposition of S corporations. A number of large multinational S corporations are long-time clients of the Firm. We also structure S corporation acquisitions and dispositions and we advise corporations converting to S corporation status.

FAMILY PARTNERSHIPS
In conjunction with the Firm’s Private Clients Practice, one of the United States’ largest group of estate planning lawyers, we structure family partnerships designed to facilitate transfers of property, businesses and investments between family members in a tax-efficient manner. We also structure partnerships designed to permit family members to pool investment funds and obtain professional investment management.

OTHER SPECIFIC AREAS
Our Pass-Through Entity Tax Practice is experienced in a number of other specific areas that are structured to incur one level of income tax:

  • Service and professional firms, including conversion to a form that provides limited liability to the owners
  • Securities and commodities investment partnerships, both U.S. and off-shore, including partnerships using allocations to avoid tax distortions to investors
  • Venture capital partnerships, including those with foreign or tax-exempt partners
  • "Vulture" and other workout funds
  • Publicly traded partnerships
  • Workouts and acquisitions of bankrupt and troubled partnerships
  • Equipment leasing trusts and partnerships
  • Partnership investments and joint ventures involving pension funds or other tax-exempt entities such as hospitals or schools
  • Regulated investment companies (RICs)
  • Common trust fundsQualified settlement funds

Contacts

Tax Client Services

McDermott Will & Emery

McDermott Will and Emery