Entity Selection & Tax Planning

Concept

Entity Types

Sole Prop: pass-through, unlimited liability, SE tax. Partnership: pass-through, flexible allocations. S Corp: pass-through, limited liability, 100 shareholder limit. C Corp: double taxation, unlimited shareholders. LLC: flexible treatment.

Key Point

Section 199A QBI Deduction

20% deduction on qualified business income from pass-throughs. Limited by W-2 wages and qualified property. Phase-outs for specified service businesses.

Example

S Corp Tax Advantage

$200K profit as sole proprietor: full SE tax. As S Corp: reasonable salary + pass-through distribution avoids SE tax on the distribution portion.

Partnership & S Corp Taxation

Ready to test your knowledge?

Practice questions from this module to reinforce what you learned.

Practice Questions