Two individuals, Aaron and Bob, want to form a new business venture, invest $5,000 each in it, and raise additional capital of $10 million from either a handful or thousands of investors.

What are the three principal alternative regimes in the Code for taxing the business income that might be earned by such a venture (identify by subchapter name)?

Which of these regimes requires the business entity to pay tax on the income earned by the business?

Which of these regimes requires the entitys owners to pay tax on the income earned by the entity?

Aaron and Bob may organize one of the following entities to operate their business venture. Which of the following entities will the Code necessarily treat as a corporation? Which can the Code treat as a corporation, if the entity so elects? (Explain why or why not?) Assume for these questions that the investors number either 10 or 10,000 (in which case the equity units are publicly traded).

A corporation chartered under the Delaware corporate laws.

A general partnership.

A limited partnership.

A limited liability company organized under the Delaware LLC statute.

A trust of which Aaron and Bob are the trustees and the investors are beneciaries.

Aaron and Bob organize a Delaware corporation for the business (having obtained no investors) but continue to operate the business under its pre-incorporation name, Aaron & Bob Enterprises, continue to use the pre-incorporation bank account, make contracts for the incorporated business in their own names as individuals, and generally ignore the incorporation except for depositing receipts in a corporate bank account and paying themselves salary (but with no employment contract or board resolution) and ling a corporate income tax return as a C corporation. Could the Service assess Aaron and Bob for tax on the corporate