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To LLC or not to LLC: Entity choice and tax reform

Sometimes, an accountant’s error is open for all the world to see, as in the wrong envelope handed over by the PwC accountant at the Oscars on Sunday night. At other times, only the accountant, the client, and perhaps the IRS are aware of the error. That’s the case in choosing the type of entity to use when setting up a business.


“Under the Trump proposal, a C corporation will have a significantly lower rate than the individual rate applied to pass-throughs, according to Timothy Jessell, CPA, Esq., a partner at Greenberg Traurig. “The question is whether or not entities should start converting to C corporations,” he said. “The answer is, ‘Not yet,’ and probably ‘No’ in most situations. Under the House and Trump proposals there’s also a lower rate for a pass-through entity, so it gets the benefit of the lower rates as well.”

There are situations where it makes sense to be a C corporation, such as the availability of the Section 1202 exemption on the sale of the stock. “If I could get zero tax on a sale of the business, I would accept a lower sale price,” he said. “That makes sense for tech start-up companies.”

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