Business tax planning

Opportunities For Business Owners

Business tax planning is a year-round activity. But the last several months of the year may present specific opportunities to minimize taxes on your business income.


Your business structure determines how your business income will be taxed. And, while taxes are only one consideration in choosing a business form, they can be an important one.

Compare business forms

As a preliminary to your year-end business tax planning, look at your current form of doing business. You may discover that another form would be more beneficial. With certain exceptions, a corporation that has an 5 election In place doesn't pay federal corporate Income taxes. Instead,S corporation Income, losses, deductions, and credits "pass through" to the owners to be reported on their tax returns. Thus, S corporation income generally is taxed only once - to the shareholders - unlike regular C corporation income. which is taxed twice - once to the corporation and again to the shareholders when it is paid out as dividends.

Like a corporation, a limited liability company (LLC) generally provides owners with protection from personal liability for business debts and obligations. But most LLC owners can choose to have their businesses treated as partnerships for income-tax purposes. Partnership treatment means:

  • Income, losses, deductions, and credits pass through to the individual owners (called "members") to be reported on their individual returns.
  • LLC income isn't subject to double taxation.
  • An LLC can specially allocate income and expenses among its owners to the same extent a partnership can.

Remember, as the tax law currently stands, starting in 2013, the top individual tax rate (and, thus, the top rate for LLC and partnership income) is scheduled to rise to 39.6% - 4.6 percentage points higher than the 35% corporate tax rate for C corporations (see table). This could be a factor in reviewing your business form.

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