NEW TAX-SAVING BENEFITS OF MULTIPLE CORPORATIONS
          
          
               Small-business owners tried to avoid owning
          regular corporations after the Tax Reform Act of 1986
          because corporate tax rates were higher than individual
          rates.  Many regular corporations converted to S
          corporations so that income would be taxed at the
          owners' rates instead of the corporations' higher
          rates.  But under the Clinton tax code, top individual
          tax rates are higher than top corporate rates, so there
          are benefits to having income taxed to the corporation. 
          (Exception: Personal service corporations are taxed at
          a flat rate of 35%, so the changes do not apply to
          them.
               A related benefit small businesses get under the
          Clinton tax code is splitting business income among
          several regular corporations.  This produces
          substantial tax savings when the total taxable income
          is less than $2 million or so.
               For example, a corporation has taxable income of
          $200,000.  The tax is $61,250, for an average tax rate
          of almost 31%.  When the income is spread over five
          corporations, each having $40,000 of taxable income,
          the total tax is $30,000.  Each separate corporation
          saves about $11,750 in taxes per year when compared
          with a single corporation.  When compared to having the
          income taxed to the owner through an S corporation,
          each regular corporation saves as much as $18,500 in
          taxes.  That savings usually makes the additional cost
          of creating and maintaining each corporation
          worthwhile.
               Since the benefits of multiple corporations are so
          great, the IRS has a number of methods to prevent
          widespread use of multiple corporations.  When one
          corporation owns 80% or more of another (parent-
          subsidiary corporations), the income is taxed as though
          it were earned by one corporation.  When the same five
          or fewer shareholders own 80% or more of the stock in
          two or more corporations, and the same five or fewer
          shareholders own at least 50% of each corporation,
          these are called brother-sister corporations and also
          are taxed as though one corporation earned the income.
               Small-business owners can set up multiple
          corporations and avoid having them taxed as brother-
          sister corporations by having employees of each
          business own some of the stock.  The stock can be
          subject to a buy-sell agreement that requires a
          departing employee-shareholder to sell the stock back
          to the corporation.  The IRS rules are tricky, so be
          sure that a tax expert sets up your plan.
               To make multiple corporations work, you also need
          business reasons for establishing separate
          corporations.  This is fairly simple when a business
          can be easily divided and is a problem only when there
          is one business activity being run from one location.
               Successful business owners don't want income taxed
          to them under the Clinton tax code.  Individual
          marginal tax rates can be as high as 44% when adjusted
          gross income is in the range where itemized deductions
          are reduced and personal exemptions are phased out. 
          For that reason, many proprietors and partners are
          looking to incorporate their businesses to shelter
          thousands of dollars from taxes.
               The tax benefits of a regular corporation can be
          enhanced through a carefully planned and profitable
          incorporation.  For example, do not automatically
          transfer all the business property to the corporation. 
          Keeping some property out of the corporation offers
          opportunities to take cash out of the corporation in a
          tax-advantaged way later by renting the property to the
          corporation.  In addition, property that you expect to
          appreciate usually should not be transferred to the
          corporation.  When a corporation sells property, it
          pays income taxes on the gain.  Then you pay taxes
          again when any of the sale proceeds are distributed to
          you.  A better strategy is to keep appreciating
          property in your name or in a trust or S corporation
          controlled by you.  Then there is only one tax on you
          when the property is sold, and you have the sale
          proceeds.  Keeping assets out of the corporation also
          provides opportunities to split income among family
          members by giving the property to your children and
          having them rent it to the corporation.
               The regular corporation currently offers many
          small-business owners a substantial tax advantage over
          sole proprietorships, partnerships, and S corporations. 
          But the regular corporation does incur double taxes on
          the sale and liquidation of appreciated property and
          makes estate planning difficult.  You can reduce these
          problems and multiply the benefits of the corporation
          by carefully planning with your tax advisor which
          assets should be transferred to the corporation and
          which should not.
               For information on a highly-recommended national
          service that can form a corporation for you in any
          state, write to Incorporation Information Package, 818
          Washington Street, Wilmington DE 19801.