Partnership Taxation

A group of alumni are considering creating a new Tigers gear business. The business will be owned by three individuals. They would like to know whether they should go with an S corporation structure or with a partnership structure. Clearly, there are multiple considerations to take into account in this decision. Some of the most pertinent are the following:

• One of the alums owns logo and trademark property with small investment basis, but a high FMV
• This alum also holds appreciated land, and a fully depreciated (tax purposes) warehouse
• One of the alums is a famous athlete who would like to allow the use of his likeness for the business, provide personal appearances, and be the spokesperson for the business in return for an equity interest.
• One of the alums has access to cash to help fund the business. She also has substantial credit capacity to serve as a guarantor on any loans to the business.

What entity choice would you recommend? Why? Address directly the provisions that would be advantageous or disadvantageous in this situation. What additional information/considerations would like to know in formulating your recommendation?

Take into account self-employment taxes, Section 199A, and other considerations. You should provide citations to the primary source material you are relying on for purposes of your analysis.