Since 2014
ENTRY-LEVEL ENTREPRENEURS AND THE CHOICE-OF-ENTITY CHALLENGE
Pittsburgh Tax Review
View Archive Info| Field | Value | |
| Title |
ENTRY-LEVEL ENTREPRENEURS AND THE CHOICE-OF-ENTITY CHALLENGE
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| Creator |
Satterthwaite, Emily Ann
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| Description |
For first-time, lower-income and credit-constrained entrepreneurs (“entry-level entrepreneurs”), the employment tax savings proffered by a longstanding tax shelter known as the “Sub-S Shelter” can be particularly salient. Such hypersalience is problematic from a policy perspective. It not only increases the costs and complexity of the entry-level entrepreneur’s deliberation process concerning the appropriate entity for her business, but it distorts her incentives to choose the entity that best supports her business’s future growth. I argue that because the hypersalience of the Sub-Shelter is likely to be more pronounced for entry-level entrepreneurs than for entrepreneurs with more experience or better access to capital, the burdens of the shelter are distributionally regressive. As an alternative to full-scale reforms that would eliminate the demand for the Sub-S Shelter but may be politically infeasible, I suggest that the shelter’s regressive hypersalience can be addressed by government measures to provide choice-of-entity information tailored to the needs and concerns of entry-level entrepreneurs. Such targeted information can mitigate the hypersalience of the Sub-S Shelter by underscoring the risks of relying on it, while highlighting the real option value of choosing a more flexible business entity such as an LLC. By nudging entry-level entrepreneurs towards neutrality in regard to their choice-of-entity decisions, this approach has the potential to improve both the efficiency and the equity of a key step in formalizing a new business.
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| Publisher |
University Library System, University of Pittsburgh
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| Contributor |
—
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| Date |
2013-09-03
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| Type |
info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion Peer-reviewed Article |
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| Format |
application/pdf
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| Identifier |
http://taxreview.law.pitt.edu/ojs/index.php/taxreview/article/view/16
10.5195/taxreview.2013.16 |
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| Source |
Pittsburgh Tax Review; Vol 10, No 2 (2013)
1932-1996 1932-1821 |
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| Language |
eng
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| Relation |
http://taxreview.law.pitt.edu/ojs/index.php/taxreview/article/view/16/27
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