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When creating and operating a business the owner must determine his or her "basis" in the business.How does the owner compute his or her basis in the business when the business is operated as a "C" corporation, an "S" corporation or a partnership? What is the significance (i.e. importance) of the basis amount to the owners? Your answers need to be clarified. For example, suppose the owner begins a new business and contributes the following to his business:

1)$10,000 cash

2)Equipment worth $15,000 with a basis to the owner of $8,000 and,

3)Services valued at $5,000

What is the owners initial basis in his business if the business is operated as:

1)A C corp.

2)An S corp. or

3)A partnership?

You need to also discuss what would cause the owners basis to change in the future? For example, if the business operates at a profit or a loss would this change the owners basis in his business if he operates as a C corp., an S corp., or a partnership? Are there other situations that would also change the owners basis?

What is the significance of the basis amount to the owner? For example, is basis important when the owner sells his business? Also, both S corps. and partnerships are flow-through entities. You need to discuss how the owner's basis affects the amount of losses the owners can deduct that flow-through to them from the business.

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