The Tax Cuts and Jobs Act (TCJA) makes the idea of operating your business as a C corporation more attractive than before.
Reason. The TCJA created a flat 21 percent corporate federal income tax rate. That low rate applies equally to garden-variety C corporations and to personal service corporations.
Compare the 21 percent corporate rate to the 37 percent maximum federal income tax rate for individual taxpayers, and you can see why the C corporation status seems golden.
But there’s more to the story. C corporations face tax issues that don’t affect sole proprietorships, single-member LLCs treated as sole proprietorships for tax purposes, and pass-through entities (partnerships, multimember LLCs treated as partnerships for tax purposes, and S corporations).
Here’s what you need to know about the potential tax negatives of running your business as a C corporation.
Conventional Wisdom Then and Now
Before the TCJA, conventional wisdom dictated that you should conduct most small and medium-sized businesses via pass-through entities because that avoided ... Log in to view full article.