Tax problems of small business;

              Tax Problems of Small Business
BY JACK MACY PRINCIPAL, CHICAGO OFFICE
Presented before the National Association of Cost Accountants, South Bend Chapter — December 1956
In a sense, the basic tax problem of small business is no different from all business' problem which is that taxes take an awfully large share of income. But as compared with larger businesses, the small business has, I think, one great advantage and also one considerable handicap in tax matters.
The handicap of the small business arises from the increasing complexity of tax problems. This complexity puts a heavy burden on the general management of an organization wherein each key man — or perhaps the key man--has to keep up not only with taxes but also with cost and financial accounting and even non-accounting matters such as production and sales.
The advantage of small business is its comparative flexibility. Important as it is to report transactions that have occurred, properly making use of available elections and the like, the principal tax savings come to the businessman who considers tax consequences before he acts and arranges his affairs most favorably. The operating procedures of large business are often frozen into molds that can be altered only at great expense. The small business, on the other hand, can frequently adapt itself to avoid the penalties and to use the benefits inherent in the tax structure.
My purpose will be to point up some places where management has a choice, and the choice made can have a major effect on the tax burden.
FORM OF ORGANIZATION
Normally the first such choice is the form of organization--whether corporation, partnership, or proprietorship. It should be noted, too, that this is not necessarily a matter settled once for all time. Pro­fitable
changes can sometimes be made, and the managers of a small
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