The math has changed on entity choice. Under the new tax reform legislation, the corporate tax rate drops a full 14 points, from 35 percent to 21 percent. At the same time, the top individual rate is lowered only 2.6 points, from 39.6 percent to 37 percent. This means the spread between corporate rates and the individual rates that apply to pass throughs, such as partnerships and S corporations, has widened dramatically. Many owners of businesses taxed as pass throughs are therefore wondering if now is the time to switch to C corporation status.
The answer, as is usually the case when it comes to taxes, is……it depends.
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