Question

Dylan, Emma and Esther want to incorporate a partnership and start a business. They just learned from their tax class that a partnership is a flexible way to do a business. They have some money but wants to float an Initial public offering (IPO) and have this large partnership listed on the NASDAQ stock exchange. Please advise them on the following tax issues:

        

a)      Basis to them of the partnership interest, holding period.

b)      Agreements and incorporating the entity.

c)      Organization and start-up costs and Syndication cost

d)      Choice of the taxable year

e)      Guaranteed payments to be made to Dylan.

Answer 1

Yes indeed a partnership is a flexible way to do a business but if one wants to list in stock exchange they shall float a company

So the partnership shall be converted in to a company to list on that NASDAQ stock exchange

a) The partnership Dylan, Esther & Emma becomes the promoters to the company in the ratio of their partnership

b) Agreements required are

-- Memorandum of Association

--Articles of Association

--Underwriting agreements

--other relevant documents for ipo

C) All the start-up costs can be aggregated as Preliminary expenditure and are available for deduction after listing

D) Taxable year will be the year in which the company is listed