Will you be leaving money on the table next year?
Tax reform is here, and it’s time to seriously review your business.
Just before Christmas, Congress passed legislation changing the corporate tax rate to a flat rate of 21%. This change and the details behind it make it a great time to evaluate your tax situation and potential savings, or liabilities.
Happy New Year!
Or is it?
New Tax Laws
It’s important to note that the rules for your 2017 taxes haven’t changed. But for many companies, the first few months of the year will be spent figuring out how the new rules and regulations can be used to reduce their 2018 tax bill.
For example, there may be a reason to restructure your company from an LLC to a C-corporation if you meet certain income and industry criteria. This change is not typically undertaken without the right business fundamentals. Now, however, might be the time.
The rules are complicated, and the IRS is still developing the guidance for 2018. The tax accountants and planners are already very busy.
What help do you need?
Does your situation meet one or more of the following criteria? If so, give CFOshare a call. We’ll help you tackle this new world.
- You are planning to raise capital or add outside investors.
Outside investors, startup accelerators, and venture capitalists prefer a C-corp structure to that of S-corporations or LLCs. C-corps allow for isolated tax treatment, loss carry-forward, and convenient portfolio bookkeeping. It may be time to convert your business to a C-corp.
- You and your spouse generally sit in a higher income tax bracket.
Starting this year, C-corp tax rates are to 21%, compared to up to 39.6% for pass-through income. If your household is currently at the highest tax rates, changing your legal entity could make a difference of thousands of dollars.
- Your business is involved in health, law, consulting, or athletics, which now receives unfavorable tax treatment.
It’s important to find out if the new pass-through rules apply to you. It could make a big difference in your 2018 tax bill.
- You intend to reinvest most profits into growth over the next 5 years, rather than pay dividends.
If you’re re-investing profits, the normal “double taxation” C-corp problem may not apply to you for the next few years. Additionally, capital expenditure deductibility rules have changed which affect decisions around buying equipment.
- You are already a closely held C-corp paying dividends or owner draws
New pass-through credits mean an LLC conversion could save you thousands! But don’t rush through the process. There are many details to look at, and ignoring the necessary steps could cost you more than you save.
How are you taking advantage of these new rules? If you’re losing sleep over all that needs to be done, leave it to the professionals. Call us now to start making sure you don’t leave any cash on the table next year.
Want to learn more about the new tax law? CFOshare can help. With more than a decade of experience, our team provides worry-free financial and operational services to entrepreneurs, small businesses, and nonprofits. Contact us for a free 6×60 review today. We’ll sit down with you for an hour to discuss your specific needs.
Schedule your free review here.