Why It's the Best Time Ever to Be a C Corporation
The recently passed Tax Cuts and Jobs Acts makes C corporations the best time ever to be in this form of entity.
In one of the most impactful tax reductions I have seen in my professional career, C corporations now pay tax at a FLAT RATE of 21% starting in 2018. This is down from graduated rates that went as high as 35%.
This reduction, along with the benefits of 1202 stock on exit, makes it a great time to explore with KN+S whether you should be a C corporation.
1202 stock is one of the best items Congress has ever given stockholders. If you are a qualified small business, have held your stock for 5 years and got it from an original issue at the time that the assets of the company were under $50m, you may exclude the GREATER of $10m or 10 times your basis. So many of our exits here at KNS end up qualifying for 1202 tax treatment, and that saves the owners millions of taxes on the exit that they sometimes have forgotten about.
Warning though - if, on an exit, you have sold your assets rather than the stock of the company, the C corporation could cost you more.
So, if you are setting up your next new company, we should talk. And if you are an S corporation or Partnership, we should talk about the advantages and disadvantages of changing your entity form. There may be a taxable event on the conversion in a partnership.
Please contact your KN+S representative for more info.
Jeff Solomon, C.P.A., C.V.A., Managing Shareholder at Katz, Nannis + Solomon, P.C. If you have any questions or would like to speak with one of our tax professionals, please contact our office at 781-453-8700.