| Budget Amount *help |
¥1,750,000 (Direct Cost: ¥1,600,000、Indirect Cost: ¥150,000)
Fiscal Year 2007: ¥650,000 (Direct Cost: ¥500,000、Indirect Cost: ¥150,000)
Fiscal Year 2006: ¥500,000 (Direct Cost: ¥500,000)
Fiscal Year 2005: ¥600,000 (Direct Cost: ¥600,000)
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| Research Abstract |
Since 2005, many kinds of organizational forms of business entities have been introduced in Japan. It should be considered which legal organizational form maximizes after-tax cash flow for the investors when the investors choose a legal form of a business entity.
The legal organizational forms of business entities can be classified into four categories from the view point of taxation: pass-thorough organization immediately imposed on investors, dividend-deductible organization where the investors pay taxes on dividends receivable, pass-thorough organization where the investors pay taxes on dividends receivable, and corporation. I compare the after-tax cash flow among these organizational forms.
The results show that pass-thorough organizations immediately imposed on investors, partnerships for example, do not always have advantage of taxation. The after-tax cash flow is influenced by two factors: whether the investors get income of the entity as dividends or as capital gains, and how long the investors hold the equities. When investors get income of entity as capital gains, the tax advantage of pass-thorough organizations immediately imposed on investors get lower because in usual tax rate of capital gains is lower than tax rate applied to dividends. As long the investors hold the equities, the more the tax advantage of corporation because the investors can get the benefit of deferred tax at investor-level. For example, the corporation form is more tax advantageous than partnership form when investors hold the equities for longer than thirty years with dividend yield of 1% under current tax rate schedules in Japan.
These results implies that we should consider not only pass-thorough or corporation forms but also term of investment, kinds of transfer from entity to investor, and other non-tax factors, such as flexibility of corporate governance, liabilities of investors, financing costs, and etc from the view point of the purposes of entity.
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