The best structure for a business can change over time, so a checkup is always a good idea.
Income taxation and owner liability are the main factors that differentiate one business structure from another. Many businesses choose entities that combine flow-through taxation with limited liability, namely limited liability companies (LLCs) and S corporations.
The top individual rate is now higher (39.6%) than the top corporate rate (generally 35%), which might affect business structure decisions. For tax or other reasons, a structure change may be beneficial in certain situations, but there may be unwelcome tax consequences, so be sure to consult your tax advisor.
Some tax differences between structures may provide planning opportunities, such as those related to salary vs. distributions. (See “Employment taxes for owner-employees.”)
Seek the services of a legal or tax adviser before implementing any ideas contained in this blog. To reach a financial advisor at Lane Gorman Trubitt PLLC, call (214) 871.7500 or email email@example.com.