Most likely when you chose your business structure or entity type it was a snap. Your accountant or lawyer helped you to consider a few facts and then you came to one of the most popular entity types: an S corporation (S Corp) or a limited liability company (LLC.) But following President Donald Trump’s Tax Reform Bill, restructuring your business may be the best thing to do.
Restructuring Your Business May Be The Best Thing To Do
The Tax Cuts and Jobs Act (TCJA) passed last December has made the choice of structure challenging for both new and established businesses. While in the past a C Corporation was hardly ever considered but now companies can not ignore the new 21 percent corporate tax rate which was previously lowered from 35 percent.
What Business Structure Will Benefit the Most
The Tax Cuts and Jobs Act (TCJA) has successfully impacted almost every type of business, but rather than going through each form, here are the two main groups.
Pass Throughs are partnership business structures, S corps, and LLCs. The Tax Cuts and Jobs Act (TCJA) introduces a new 20 percent deduction on qualified business income. However, this deduction is temporary and will expire in 2025 if another law is not passed to extend its time.
The rate for C Corps took a major plug from a whopping 35 percent to 21 percent. And unlike the 20 percent deduction for pass-through structures, this change is permanent. This means the top rate will stay at 21 percent until Congress changes it. This is a huge shift and is sending many business owners running to their accountant’s office.
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At PayWow we understand the complexity of processing payroll and trying to manage the day to day business. This is failing to mention the ever-changing political and tax policy scene. Which is why we strive to simplify your payroll needs with our innovative payroll software solution. Utilize our informative payroll blogs to read the latest small business news and information.
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