One of the most pressing issues right now, “on” the business
One of the most pressing issues for taxpayers and business owners is how their entity is legally organized.
The big question is whether you should operate as a "C" corporation which pays its own taxes to the IRS, or as a pass-through company which pays taxes through the individual tax return of the owner. Pass-through entities include "S" corporations, sole proprietorships, and limited liability corporations or LLCs.
Keep in mind that the clock is ticking. As we said yesterday in this column, if you wish to switch, NOW is a very good time to consider as March 15th is the last day to make an election that would be retroactive to the beginning of the 2018.
Why all the hubbub?
One attribute of the new tax code for "C" corps is a reduction in the corporate tax top rate from 35% to 21%. 14 (possible) points has a way of getting your attention! As they say in the advertising business, read the fine print. Your results may vary.
The best way that I know to get a better handle on this is to model the cash flows side-by-side.
Those of you who presently are a C corp know that as owners in a C corp pay a second tax on profits distributed as dividends. Keep this in mind as you think about this globally.