The Tax Cuts and Jobs Act brings dramatic changes in the way many entities are taxed. Businesses of all sizes are questioning whether they are currently optimizing their legal structure. Some will decide to change entities, others will not.
No single option fits all. You’ll have to crunch the numbers to know which entity structure is right for your business.
Here’s a few things to consider with your TaxOps advisor:
- Headache of conversion
- Double taxation: the top effective rate for corporate owners is still around 39% whereas the top individual rate is 37%, without the pass-through deduction
- Revoking an S election means you won?t be able to re-elect S Corp status for 5 years
- Personal deductions on individual returns
- Self-employment tax breaks on S corps
- Service businesses that typically retain minimal capital may not benefit much from converting to a C Corp for federal income tax purposes
- And more
Work with your TaxOps advisor to make sure your analysis is comprehensive and conclusion is sound before you commit to the headache of changing structures.