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| | Issues to Consider When Merging Two S Corporations or Other Closely-Held Entities |
 | | Tom and Mary want to combine their subchapter S corporations, Acme Corporation and Beta Corporation, respectively, and work together as owners of a new entity. |
 | | Under this scenario, Acme and Beta retain their independent entity status, which means that each continues in business with its individual employees and liabilities remaining within each independent entity. |
 | | Unlike earnings from an S corporation, which, if characterized as income from personal services is subject to employment taxes, the royalty income is not personal service income and, therefore, not subject to employment taxes. |
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