Choosing the right entity (sole proprietorship. partnership, LLC, Corporation, and whether to make an S-Corp election), has ALWAYS been complicated. Only with your objectives in mind should you begin this journey.
And as cash flow, profit forecasts, capital needs, (and involved parties) can change, this is a FUNDAMENTALLY important decision.
And although the TCJA 2017 changes are no longer new, awareness of the changes highlights the differences between, and multiple aspects of, choosing one entity type over another.
The Tax Cuts and Jobs Act dropped the top corporate rate to 21% and creates new Code Section 199A that provides for a 20% deduction for the non-wage portion of pass-through income.
These changes set up several important questions for advisers and their clients.
Among them are the following:
1) What will a client’s pass-through deduction look like?
2) Is a particular client “better off” being a C Corporation or a pass-through entity?
3) Is a client "better off" staying as an employee or switching to independent contractor status?
4) Should Schedule C business owners switch to being an S corporation and pay themselves a salary in order to claim a 199A deduction?
5) Trusts and estates can qualify for the IRC 199A deduction, but how should an adviser compute the amounts apportioned to the trust/estate and the beneficiaries based on the rules under old IRC 199 and Treasury Regulation 1.199-5?
6) How will a contribution to a Qualified Retirement Plan reduce taxable income and how will that impact the IRC 199A deduction?
We have the analytical tools, the experience, and the knowledgeable experience (and the objectivity of a third party) to help you with this important decision.