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Tax Guy: Should your business be a C corporation or pass-through entity? What makes sense under the new tax law

The Tax Cuts and Jobs Act (TCJA) forces taxpayers to reconsider whether business ventures should be conducted as a traditional C corporation or as a pass-through entity (sole proprietorship, single-member LLC treated as a sole proprietorship for tax purposes, partnership, LLC treated as a partnership for tax purposes, or S corporation).

The main reason is the new flat 21% corporate federal income tax rate.

The other big new factor is the qualified business income (QBI) deduction available to individual owners of pass-through entities. That deduction can be up to 20% of your share of passed-through QBI. But it’s only available for 2018-2025, unless Congress extends it.

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