Taxes and Corporate Choice of Organizational Form

摘要

This paper investigates the determinants of the corporate choice oforganizational form and the effects of this choice on firm performance. We analyze the corporate income tax returns of a large number of corporations before and after the Tax Reform Act of 1986 and determine how the substantial changes in tax rates associated with this tax reform affected corporations decisions to organize as C corporations or S corporations or S corporations, which are taxed only at the personal level.