Should I make a C-Election for my business in light of the new tax reform/tax cut law?

My clients have been asking me whether it is time to make a C-Corp election to take advantage of the new corporate tax rates under the new Republican Tax Reform/Tax Cut package.

Remember, there are also new benefits in the new tax package for pass through entities as well. Most small to medium businesses are going to find themselves trying to calculate exactly what those benefits could mean to them. Your CPA is probably the first person you are asking about the difference in your rates, but the inquiry does not end there.

For businesses that may only marginally benefit from a C-election based on the difference in tax rate your inquiry is NOT OVER. Now it is time to talk to a business attorney about whether the structure of a C-Corporation can benefit the capital goals of your business!

  • Are you thinking about raising capital?

  • Do you have owners/shareholders that could benefit from restructuring and clarification?

  • Do you have a need to retain large amounts of earnings in your business to support growth into larger projects?

  • Do you have current S-Corporation stock holders that you would like to allow to be split into preferred and non-preferred classes?

  • Does your business have people who are passively invested together with the people who are operating the business on a day to day basis?

  • Are you the sole owner and you actively operate your business?

  • Do you have problems with your owners when it is tax time and the owners want you to distribute money to them to pay for the proportional tax impact of net profits that the business earned but did not distribute?

It is very possible to unlock highly valuable benefits to your business that go beyond the marginal difference in tax rate with a C-election. You must look beyond your current practices and performance to evaluate whether a C-election can provide real value to your business. Call or email today to see if your business could benefit.

Jimmy Newmoon Roybal, Esq.

Licensed in PA, NJ, CO