Discussion:
You have a good friend named Frank who is planning to form a new business. He comes to you for advice. He is a Christian, and he wants to obey God in the operation of his business. He is concerned as to whether Christians should attempt to minimize their tax burdens, after all, “Render unto Caesar that which is Caesar’s,” right? Further, he is concerned as to what liability protection really means and whether a Christian should use an entity that provides for liability protection. He fears that by using such an entity he might be shirking his personal responsibilities. In order to help Frank with his decision, answer the following questions:
- Define what is meant by the concepts of limited liability, and/or liability protection. From the perspective of a Christian worldview, is it wrong for a business owner to use a business organization form that provides for liability protection?
- From the perspective of a Christian worldview, is it wrong for a business to try to minimize its overall tax burden?
Top of Form
Frank is planning a new business and our task is to help him decide on an organizational structure. Without knowing the specifics of his situation, it is difficult to pinpoint what form would be best for him. It is safe to assume that we should utilize a form having limited liability, so that if the worst should happen, he will not lose his personal assets. The two immediate formats coming to mind are the Limited Liability Company (LLC) and the S-corporation. However, since Frank appears to be the only driving force for this new business and there is no mention of other associates or contributors, the LLC would appear to be the most likely format for his new enterprise.
Frank is concerned about paying his fair share in regard to taxes and about the liability protection afforded some business owners. First, in ownership of a thing and in striving to create a thing, we emulate our creator (Grudem, 2003). It is something we care for and nurture. Further, profit from a successful business yields the ability to take care of ourselves, loved ones, and to help in other areas. Second, we are absolutely to, “Render therefor unto Caesar the things which are Caesar’s…” (Matthew 22:21 KJV). “…For there is no power but of God: the powers be are ordained of God.” (Romans 13:1 KJV). However, there is no guidance indicating that we are to give more than our fair share. Third, as accountants we embrace tax avoidance and warn against tax evasion. The former is to pay one’s fair share, while the latter is illegal.
The limited liability of a business, in this case an LLC, means that the participants in that business are only liable up to the total assets of the business (Langvardt, Barnes, Prenkert, McCrory & Perry, 2019). This umbrella does not protect illegal and possibly unreasonably fair practices. It does, however, protect the personal assets of the owners. For Frank, we would further advise that separate checking accounts be established for the business and that personal finances are never to be mingled with company finances. All contributions, whether monies or other assets, are to be distinguished specifically to the LLC.
So is it wrong for a business to minimize its overall tax burden? The answer is no. The business should pay its fair share. A successful business provides for home and family. Hopefully, that business can also engage or employ others, so they may provide for their own. If truly successful, that business can give back to the community and directly or indirectly contribute other great commission (Matthew 28: 19-20 KJV). Is it wrong to seek liability protection? Again the answer is no. We don’t buy insurance hoping to get sick or expecting an accident to befall. We pay for these hoping that if the worst happens, we can gain assistance and hopefully make it through the rough patch. Even now, some businesses will not make it through the Covid-19 work alterations and / or stoppages. Some will lose everything. Some might only lose their business. Without that business, will they be able to carry on?
