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  • InsideTrack
  • March 04, 2015

    Advising Clients on Tax-friendly Business Investments: A Good Bet

    March 4, 2015 – Both Congress and the Wisconsin Legislature have passed tax legislation giving incentives for investing in business enterprises and rewarding investors for those investments. Sometimes affirmative action is required; sometimes qualification is automatic. Find the details in Organizing a Wisconsin Business Corporation: Articles, Bylaws, and Other Forms, recently revised.

    Investment incentives can be specific to companies engaged in particular enterprises, or qualification can be across a broad spectrum of endeavors. 

    Although an extensive overview of tax programs and legislation that may benefit newly organized Wisconsin businesses is beyond the scope of the book, the newly revised Organizing a Wisconsin Business Corporation does introduce attorneys to a few tax provisions and programs that are likely to be broadly applicable to many Wisconsin corporations. Among them are:

    • Section 1202 of the Internal Revenue Code generally excludes 50 percent of the eligible gain on the sale or exchange of qualified small business stock that is held for at least five years. In some instances, the exclusion is increased, and in one case, the exclusion is 100 percent of the eligible gain (e.g., there is a 100 percent gain exclusion for qualified small business stock acquired after Sept. 27, 2010 and before Jan. 1, 2014).

    • The Wisconsin Legislature has created an exclusion from Wisconsin income tax on long-term capital gain from the sale of investments held by individuals (including individuals indirectly holding investments through pass-through tax entities) for at least five years in a qualified Wisconsin business. 

    • Another program provides investment tax credits under 2003 Wisconsin Act 255, which allows qualifying individual “angel” investors (or individuals making an investment through a network of angels or through non-operating limited liability companies or partnerships) and qualified venture capital funds a credit against their Wisconsin income tax of up to 25 percent of their investment in a qualified new business venture. 

    Of course, tax incentives are but one of many insights and suggestions in this long-used and well-respected PINNACLE treatise.  Written by Joseph W. Boucher, Charles E. Neider, and Kent L. Schlienger, all of Neider & Boucher S.C., and now in its fourth edition, this book provides all essential business incorporation forms, including:

    • Articles of incorporation
    • Bylaws
    • Share certificates
    • Minutes of organizational meetings
    • Subscription agreements

    Comments to these annotated forms explain the sample form language, review the statutory requirements, and describe alternative provisions. The book also provides guidance on how to modify the standard articles and bylaws for statutory close corporations, S corporations, and service corporations. 

    Organizing a Wisconsin Business Corporation also discusses procedures that allow limited partnerships, corporations, nonstock corporations, and limited liability companies to merge or to convert to another form. The book analyzes the mechanics, effects, and tax consequences of these conversions. A companion CD includes unannotated versions of every form in the book, and these forms are available for download with a Books UnBound® subscription.

    Organizing a Wisconsin Business is available in print and via Books UnBound, the State Bar’s interactive online library. For pricing, more information, or to place an order, visit the WisBar Marketplace or call the State Bar at (800) 728-7788 or (608) 257-3838. Subscribers to the State Bar’s automatic supplementation service will receive future updates at a discount off the regular price. 

    Annual subscriptions to Books UnBound start at $149 per title (single-user price; call for full-library and law-firm pricing).


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