Due to the high corporate tax rate for NH corporations, and the non-recognition of S status by NH, many S corporation made use of the maximum amount of reasonable compensation possible; preferring to pay into the social security system rather than pay a Business Profits tax AND a Interest and Dividends tax on the distribution of those profits (previously 13.5%, now 12.9%).
In light of QBID i am wondering if any preparers with NH S corporations:
1. Have advised those corporations to complete a Statutory Conversion to an LLC taxed as an S corporation in order to eliminate the NH I&D tax on distributions of "AAA"?
2. If clients are acting on advice to complete a statutory Conversion?
3. Is there a theory or method that would allow a single owner LLC, or a H & W owned LLC; to have non-transferable shares.
The Declatory Ruling in 2013 regarding ABC, Inc, 123, LLC and an individual is the foundation for such a strategy; the NH Supreme Court case regarding Lyme Timber Company is a warning regarding the criteria for "non-transferable interests".
Regarding item 3: The Supreme Court of NH, the RSA's and the DRA place quite a bit of emphasis on non-transferability - I wonder if there are other reasons to prevent classifying an entity as a corporation since the Supreme Court and the DRA invoked Morrissey v Commissioner (1935) in their arguments.