Working Paper No. 907

Taxes and the Choice of Organizational Form by Entrepreneurs in Sweden

Published: March 26, 2012Pages: 42Keywords: Self-employment; Entrepreneurship; Taxation of closely-held businesses; Business organizational formJEL-codes: G32; H25; G38

Taxes and the Choice of Organizational Form by Entrepreneurs in Sweden Karin Edmark and Roger Gordon

This paper makes use of individual data for 2004 to 2008 on owners of closely-held businesses in Sweden to estimate the role of both tax and non-tax determinants in the choice to be a closely-held corporation vs. a proprietorship. While lower-income individuals face relatively neutral incentives, higher income households face strong tax incentives to be corporate. The data suggest a strong response to these tax incentives. Many conventional non-tax determinants are confirmed in the data as well.

Karin Edmark

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