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Highlights from the Simply Tax podcast: How to choose an entity for a family business

Steve Gorin January 18, 2019

Choosing to structure a business as a C corporation, an S corporation, or an entity taxed as a partnership (often an LLC) is no simple decision. As we discussed previously, 2017 tax reform offers promising short-term annual tax savings for C corporations, but certainly the decision requires careful consideration of exit strategies as well. When it comes to family businesses, the choice is especially important for estate planning purposes.

Steve Gorin joined two episodes of the Simply Tax podcast to provide more insight on the nuances and considerations of each, alongside Susan Jones and host Damien Martin of BKD CPAs & Advisors, which sponsors the Simply Tax podcasts and invited Steve to participate. In episode 51, Steve and Susan discuss the features of each kind of entity, self-employment tax considerations, the effects of tax reform, and more. In episode 52, Steve and Susan discuss the limitations of C corporations, converting C corporations to S corporations, the future of tax rates, and more.

Both podcasts are available below and through the Simply Tax website.

If you’d like to jump to a specific topic in this episode, please use the guide below and advance the video player to that particular time stamp.

  • Who is Steve Gorin? @ 02:45
  • Who is Susan Jones? @ 04:53
  • Overview of the taxation of entities @ 06:18
  • Navigating the menu of choices of entity @ 13:26
  • Calculating the effective annual tax rate @ 16:40
  • Exceptions to “47.3 percent pay me now or pay me later”
    • Qualified small business stock @ 20:40
    • “Step up” in basis at death @ 22:01
  • Self-employment tax considerations @ 24:37
  • Pressures to pay dividends
    • Personal holding company tax @ 29:13
    • Accumulated earnings tax @ 30:30
  • A trap for professional service corporations after tax reform @ 32:11

Complementing episode 51 is Steve’s free webinar: Effective Business Income Tax Rates in Light of 2017 Tax Law Changes 12-7-2018.

If you’d like to jump to a specific topic in this episode, please use the guide below and advance the video player to that particular time stamp.

  • Irrevocable grantor trusts explained @ 1:11
  • “A C corporation is fundamentally incapable with a sale to an irrevocable trust or a grantor retained annuity trust (GRAT)” @ 8:32
  • Possible exit charges on converting a C corporation to an S corporation (and possible strategies to avoid them)
    • Method of accounting considerations for choice of entity @ 12:55
    • Distributing your S corporation accumulated adjustments account @ 15:06
  • Future of tax rates @ 20:57
  • What if you change your mind and you want to go back to being an S corporation? @ 24:25
  • The built-in gains tax considerations @ 26:34

The purpose of this podcast is to provide news and information on legal issues and all content provided is for informational purposes only and should not be considered legal advice. If you desire legal advice for a particular situation you should consult an attorney.

Steve Gorin is a nationally recognized practitioner in the areas of estate planning and the structuring of privately held businesses.