This story appears in the
December 2001 issue of
Entrepreneur.
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With the economy dragging, a bipartisan effort is afoot in
Congress to ignite the afterburners on subchapter S corporations.
Over the past decade, S corps have lost some of their allure as
states (and the IRS) have authorized creation of limited liability
corporations, which have the advantages of S corps without the
federal regulatory disadvantages.
So why not switch an S corp to an LLC? Because an S corp cannot
be converted to an LLC without paying taxes on appreciated gains on
assets. That's why Sen. Orrin Hatch (R-UT) is sponsoring the
Subchapter S Modernization Act (S. 1201). "Subschapter S, as
enacted and modified over the years, contains a variety of
limitations, restrictions and pitfalls for the unwary," Hatch
says. The bill, backed by the U.S. Chamber of Commerce, would make
a number of numbingly technical changes in rules on who can be
shareholders, stock classification, accounting for losses and S
status termination.
The S corp bill's main drawback is that it would cost the
federal government more than $3 billion over 10 years, although
that estimate has not been formalized by the Congressional Budget
Office. The current strategy is to attach the bill as an amendment
to an increase in the minimum wage.
Inspector-B-Gone
OSHA is seeking small businesses for its Voluntary Protection
Program, in which businesses meet an OSHA list of workplace safety
and health requirements in return for exemption from routine
scheduled inspections. Participants report improved morale, reduced
workers' compensation costs and 60 to 80 percent fewer lost
workday injuries than would "average" sites of the same
size in their industries. For more information, visit www.osha.gov/oshprogs/vpp.
Stephen Barlas is a freelance business reporter who covers
the Washington beat for 15 magazines.