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CERTAIN SMALL BUSINESSES WOULD GET BOOST FROM LEGISLATION TO BE INTRODUCED TODAY; FAMILY-OWNED BUSINESSES COULD BENEFIT, SAYS COOPERS & LYBRAND

 WASHINGTON, Nov. 19 /PRNewswire/ -- Help for the approximately 1.6 million small businesses operating as subchapter S corporations may be on the way via legislation being introduced in the U.S. Senate today, according to Sam Starr, a partner specializing in S corporations with Coopers & Lybrand's National Tax Office and chairman of the AICPA's S Corporation Committee.
 "New legislation being introduced by Senators Pryor (D.-Ark.) and Danforth (R-Mo.) would make it easier for S corporations to obtain financing and would provide more flexibility in areas that affect their structure and ability to grow," explains Starr. "If passed, these legislative changes would make it easier for family-owned businesses to stay within the family because estate planning will be easier."
 S corporations are a special type of corporation that allows flow-through of profits and losses to the individual shareholders. The corporation generally does not pay taxes. Many family businesses are S corporations because the form allows them to be taxed as individuals, yet protected by corporate limited liability.
 Under current law, S corporations may have only 35 shareholders. Partnerships, other corporations, non-resident aliens, tax-exempt organizations and some types of trusts are not permitted to be S corporation shareholders. S corporations are prohibited from issuing preferred stock, which prevents them from seeking certain types of venture capital financing. They are also precluded from owning 80 percent or more of another corporation's stock, so they are unable to use wholly owned subsidiary corporations.
 The legislation would allow S corporation small businesses to issue stock to more and varied shareholders, increasing S corporation small-business financing options. S corporations could also have wholly owned C corporation subsidiaries, a type of expansion unavailable under the existing rules.
 "By relaxing some of these artificial restrictions, the legislation better reflects the practical small business considerations of the 1990s," notes Starr.
 The legislation also would change rules that result in loss of S corporation tax treatment due to administrative mistakes in electing S corporation status. These changes would remove tax traps for the unwary S corporation and its owners.
 S corporation shareholders would be treated the same as regular corporation shareholders with respect to fringe benefits. Significantly, charities, pension funds and ESOPs could be eligible shareholders.
 The legislation is a result of a joint effort of the American Institute of Certified Public Accountants, the American Bar Association and the U.S. Chamber of Commerce.
 "Small business owners who are interested in offering their comments on these proposals should write or call their respective senators or members of Congress, and Senators Pryor and Danforth. Constituent interest will be critical to getting these proposed changes to the S corporation rules passed by Congress," says Starr.
 One of the world's leading professional firms, Coopers & Lybrand provides services for enterprises in a wide range of industries. The firm offers its clients the expertise of more than 16,000 professionals and staff in offices located in 100 U.S. cities and more than 66,000 people in 120 countries worldwide.
 -0- 11/19/93
 /CONTACT: Maggie O'Donovan Bolton, 202-536-3174, or Steven Woolf 202-822-5561, both of Coopers & Lybrand/


CO: Coopers & Lybrand ST: District of Columbia IN: SU: LEG

LG-TW -- NY017 -- 6435 11/19/93 10:14 EST
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Date:Nov 19, 1993
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