Taxes and the Choice of Organizational Form by Entrepreneurs in Sweden

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.