Business Structure

View the Business Structure chart which shows the "Income tax differences based on business structure" to compare the tax treatment for pass-through entities vs. C corporations.

 

Business Structure

Income taxation and owner liability are the main factors that differentiate one business structure from another. Many businesses choose entities that combine flow-through taxation with limited liability, namely limited liability companies (LLCs) and S corporations. The Chart below shows the "Income tax differences based on business structure" to compare the tax treatment for pass-through entities vs. C corporations.

The top individual rate is higher (39.6%) than the top corporate rate (generally 35%), which might affect business structure decisions. For tax or other reasons, a structure change may be beneficial in certain situations, but there may be unwelcome tax consequences, so be sure to consult your tax advisor.

Some tax differences between structures may provide planning opportunities, such as those related to salary vs. distribution. (See "Employment taxes for owner-employees.")



Consult the Experts

Louis CerconeDouglas SosnowskiWilliam Allen 
CPA, CFE, CFF, ABV, ASA, CVACPA/ABV, ASA, CFFCPA/ABV, CFE