For tax years beginning in 2018 and beyond, the Tax Cuts and Jobs Act (TCJA) created a flat 21% federal income tax rate for C corporations. Under prior law, C corporations were taxed at rates as high as 35%. The TCJA also reduced individual income tax rates, which apply to sole proprietorships and pass-through entities, including partnerships, S corporations, and, typically, limited liability companies (LLCs). The top rate, however, dropped only slightly, from 39.6% to 37%.
On the surface, that may make choosing C corporation structure seem like a no-brainer. But there are many other considerations involved.
Here are three common scenarios and the entity-choice implications:
These are only some of the issues to consider when making the C corporation vs. pass-through entity choice. We can help you evaluate your options, please firstname.lastname@example.org or 630-505-1081 with any questions.
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