Memorandum on Restructuring of Tai-Ga Organization: Executive Summary

Introduction

In order for a firm to be restructured, all partners must be included in the organization to ensure that they save their finances for the accomplishment of their objectives, following other conditions as well as compliance with the tax required to make sure that they operate and work within the given zone with minimum or no infringement of the set standards. This memorandum focuses on the restructuring of Tai-Ga organization. The literature investigates whether the change in the form of entity is required in assisting the restructuring of Tai-Ga. Debt versus equity capital structure of Tai-Ga is also analyzed in this memo. Tax benefits, as well as tax cost, are also calculated in this paper.

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Restructuring of a business organization requires a change in the form of entity to enhance profitability as well as satisfying interest holders and creditor (Eidenmuller and Zwieten, 2015). In joint venture structure, the members are better situated to alter the legal arrangement of the corporation in the future if the need occurs. In some instances, the firm may adjust its course, and possibly a member may decide to add his/her shares in the firm or even withdraw from the business. One critical basis for a healthy break up in any organization is partnership conformity. Andy has become ill and has decided to withdraw from Tai-Ga organization. Andy's option includes selling his shares, but the best recommendation would be to seek advice from a layer to make sure that his benefits are secured during this process.

Tai-Ga firm will have to rewrite or amend the agreement after adding Brian and Acme as new partners. This is because any capital contributions from the new partners will require being listed in the operating conformity, along with their shares of interest in the firm. Several LLC (limited liability corporations) operating agreement and state acts oblige unanimous agreement to add new partners (Koch-Medina, Moreno-Bromberg and Munari, 2015). New partners are needed for several reasons which include wanting more finances to develop the business, requiring an individual with expertise in a new corporation domain as well as replacing a partner who has resigned or retired.

The optimal finance structure for the firm will incorporate equity capital in its first phase up to the third year. Equity finance will come with a substitute of ownership to the willing partners. The restructuring firm should work towards utilizing a mix of debt and equity capital to achieve maximum financial formation. The debt capital will then be accepted in the 3rd year because it has the least price of capital due to its tax deductibility. With firms, only salaries will be subjected to taxes while the return remains intact hence saving the Tai-Ga thousands of dollars annually.

Tax Law and Regulation

About tax laws and regulatory rules, the revenue collected should be used comprehensively particularly the personal income. Income from Tai-Ga should be used in support of economic growth as well as facilitates social results and market effectiveness through good price signals. According to Ciconte, Donohoe, Lisowsky and Mayberry (2016) the extent of tax should be formulated in conformity with marginal spillover price of actions. Following the tax law on personal taxation continuity in the tax and transfer structures should be conveyed through individual income tax rate scale and convey methods. In the case of Tai-Ga, a massive tax-free entry consisting of a constant marginal rate for workers should be established to offer a larger simplicity and transparency. Additionally, a basic unit in individual tax structure should persist to be the person and shares for dependants in the tax structure. Besides, it is recommendable for Tai-Ga to include an optional case for couple evaluation particularly for individuals of late retirement age.

Tax Calculations

In Tai-Ga savings from employees are accrued from the firm. The shareholders are anticipated to be staffs of the firm. Therefore, taxes are applied particularly to salaries as returns remain constant. Income tax is calculated as the sum of the tax rate multiplied by taxable income. According to According to Lang, Pistone, Schuch and Staringer, (2015) the rate of taxation may raise as taxable income decline following the dynamics of taxpayer behaviors. In comparative to sole entrepreneurship which is directed to self-employment taxes has been found to be 13.3% thus the firm cannot become productively poor after the resignation or retirement of officials.

Tax Benefits

To reduce a taxpayer burden while improving various kinds of commercial actions, it is important to calculate tax benefit. By computing tax benefit, Tai-Ga is capable of adjusting benefits of taxpayers' liabilities. Providing taxpayers with credits enables employees to enhance their living standards. Primarily, tax benefits are only provided to the taxpayer in a confined duration or tax year. For Tai-Ga to calculate the benefit of the remaining 10 million, it is important they consider various steps. First, Tai-Ga should consider their financial statements and accounting. Second, they should sum up the pretax deduction provided for workers benefits. Third Tai-Ga should calculate the post-tax benefits they provided to their staffs. Finally, the firm should sum up all their business tax deduction regarding all business transaction. To calculate the tax benefit for Tai-Ga, it is significant to consider the formulation of (Steuerle, et al 2014) as shown below.

Conclusion

The formation of Tai-Ga should assume the form of Limited Liability Corporation rather than partnership. This is because the owners are not liable in the context of possible product liability thus protecting them from individual liability in case commodities cause unfavorable events. It is clear that corporations can increase their capital rapidly through the selling of stocks and other company assets thus business individuals will not be individually liable for debts owned by the corporation.

References

Ciconte, W., Donohoe, M., Lisowsky, P., & Mayberry, M. (2016). Predictable uncertainty: The relation between unrecognized tax benefits and future income tax cash outflows.

Eidenmuller, H., & van Zwieten, K. (2015). Restructuring the European business enterprise: the European Commission's Recommendation on a new approach to business failure and insolvency. European Business Organization Law Review, 16(4), 625-667.

Koch-Medina, P., Moreno-Bromberg, S., & Munari, C. (2015). Capital adequacy tests and limited liability of financial institutions. Journal of Banking & Finance, 51, 93-102.

Lang, M., Pistone, P., Schuch, J., & Staringer, C. (Eds.). (2015). Introduction to European tax law on direct taxation. Linde Verlag GmbH.

Steuerle, C. E., Harris, B. H., McKernan, S. M., Quakenbush, C., & Ratcliffe, C. (2014). Who Benefits from Asset-Building Tax Subsidies?. Washington, DC: Urban Institute.