ERHC Energy Inc (ERHE)

[Spec29]

Damn, Balance...

I have some bad news. For Limited Partnerships, Partnerships, LLCs, LLPs and S-Corporations, members/owners/shareholders/partners pay tax on their distributive of the business income. Money received from these types of entities are called "distributions" for tax purposes. Whether or not you receive a distribution in any particular year, you must pay tax on your share of the income.

Example: Say you are a 10% owner of a limited partnership that makes $100,000 for 2005 and the L.P. does not make any distributions. You would have to report $10,000 of income on your personal tax return for 2005 and pay the tax even though you did not receive any money from the business.

Furthermore, that income is taxed as ordinary income and the tax rate on that income could be as high as 35% (i.e. the highest tax rate in effect for that year).

I wouldn't like that kind of deal at all. I want ERHC to be a straight C-Corporation and I'll take my chances on the dividends (Dividends are only received from C-Corporations) and capital gains on stock sales.