DUE DILIGENCE:
C C ?
TO
OR
N OT
TO
S h o u l d Yo u S w i t c h To A C C o r p o r a t i o n U n d e r T h e N e w Ta x L a w ?
By Andrew Geiser,
senior accountant,
[email protected]
(Millersburg office)
THIS IS THE SECOND ARTICLE IN A SPECIAL SERIES THAT
CONSIDERS THE DUE DILIGENCE NECESSARY FOR BUSINESS
OWNERS WHO ARE CONSIDERING A MAJOR CHANGE.
TO VIEW OTHER ARTICLES IN THIS SERIES, VISIT
WWW.REACPA.COM/DUE-DILIGENCE-SERIES.
One of the most widely discussed aspects of the Tax Cuts and Jobs Act (TCJA) has been the reduction in the corporate tax rate
from a top rate of 35 percent to a flat rate of 21 percent. This change prompted many business leaders to consider whether
switching from a pass-through entity to a C corporation is the way to go, or if the benefits of the new qualified business income
deduction for pass-through entities would make up the difference.
While the tax rate reduction does present potential tax savings for the business and its owner, making the switch could have
long-term implications. Many have concluded that it may make sense to forego the short-term tax savings to better align with
long-term objectives.
Four Questions For Your Consideration
Perhaps the biggest takeaway when considering an entity conversion is that all business situations are unique, and this decision
should be thoroughly evaluated before moving forward in any direction. Small details that have little impact on one aspect of your
decision may end up playing a major role in how another decision is made. Unfortunately, digging into these details can be costly
and time-consuming. We’ve identified four questions you should ask before deciding whether a shift in entity type makes sense.
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