Tax Favored: Case Study

Danquis DeArmond

Management 325

Saint Leo University

5/16/2016

First, we have Tax-Favored. Being Tax-Favored is favorable in tax terms for firms or companies to raise money through debt instead of going through the stock market. A company raises money through the stock market, and when that happens it is submitted to get taxed two times. This means the company’s earnings are taxed as part of the corporate income tax, after this is done normally the profits that are leftover get paid out to shareholders as dividends. The dividends are taxed as well. As you can see, with the money being taxed through the market, and also through dividends it is taxed two times. But, debt is only taxed one time, so when the firm makes money it gets taxed immediately. However, when the firm pays interest to its creditors the interest is not taxed. So the interest paid on debt are treated differently than dividends paid out to

A corporation is owned by shareholders, who profit from the company 's gains. A partnership is owned by two or more people who divide the business ' profits. Also, corporations can raise funds easier than other businesses, according to the U.S. Small Business Administration. Corporations can sell stock to raise money for business expenses or cover debts. Whereas partnerships must try to come up with funds on their own, or turn to loans or credit programs to raise money. (Marnie Kunz, n.d.)

So let’s say I wanted to start a pluming company and it was a partnership. My brother, my sister, and myself. We would have to come up with a way to get money, whether it be a grand from my savings and theirs. Maybe even a thousand from mom, but it would not be enough. One day I could up and decide to go play the slot machines in Vegas and blow all of our money, then what would happen to the business, it would go down the toilet. So that money would just be long