Choosing a Business Entity After the New Tax Act and Other Important Business Tax Changes Under the New Law

Sherman & Howard L.L.C.
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Part I: General - The Choice of Entity Decision Prior to 2018 -

Since the reduction of individual tax rates in the 1980’s, the decision of whether to conduct a business in the form of a C corporation or in the form of a “flow-thru” entity (i.e., partnership, limited liability company or S corporation) has been a fairly easy one. Because of the lower individual tax rates, the relatively high corporate tax rate and the “double tax” on C corporations -- (i.e., once at the corporate level and a second time at the shareholder level), distributed profits of a C corporation generally have been subject to tax at rates far in excess of the rates applicable to a flow-thru entity. As a result, a flow-thru entity has almost always been the best structure to use for a non-publicly traded business. (Publicly-traded businesses generally are not eligible for flow-thru treatment.)

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. Attorney Advertising.

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