On the tax efficiency of startup firms
| Autor: | David H. Solomon, Eric J. Allen, Sharat Raghavan, Jeffrey Allen |
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| Rok vydání: | 2022 |
| Předmět: |
History
Polymers and Plastics Limited liability Equity (finance) Monetary economics Venture capital Behavioral economics General Business Management and Accounting Industrial and Manufacturing Engineering Indirect costs Accounting Organizational structure Business Business and International Management Tax efficiency |
| Zdroj: | Review of Accounting Studies. |
| ISSN: | 1573-7136 1380-6653 |
| DOI: | 10.1007/s11142-022-09677-1 |
| Popis: | We examine the choice of organizational structure for VC-backed startup firms. These firms overwhelmingly organize as C-corporations rather than as tax advantaged limited liability companies (LLCs). This results in foregone tax savings of $43.9 billion, or 4.9% of the total equity invested in the sample firms. The decision is puzzling, given plausible estimates of the direct costs involved, but appears related to “hassle” and other transition costs generated by participants implementing a new form. Firms with more employees and investors are likely to choose the C-corporation. VCs appear to prefer the C-corporation form, as receiving VC money is associated with most LLC firms switching to a C-corporation within 30 days. Greater VC preferences for C-corporations are linked to a preference for familiarity, and less attention to taxes. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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