Advisors’ Understanding of Tax Compliance for Choice of Business Form

Choosing an appropriate business form is important for those commencing business, as making the wrong choice may result in economic inefficiencies for both the business and the broader economy. Given the life-cycle of businesses and regressive nature of compliance costs for small enterprises, to what extent are tax compliance cost considered by advisors and are they aware of the relevant empirical evidence? This paper details a study in 2007 that explored 81 advisors’ understanding of the tax compliance cost issues that can arise in terms of business forms. The findings suggest that advisors have limited knowledge of the empirical evidence about tax compliance cost which may adversely impact their advice on business formation leading to long-term adverse economic implications.