The C-Corp Zone: Episode 1
You are travelling through another dimension – a dimension not only of sight and sound but of mind. A journey into a dimension where Congress seeks to subject additional income to self-employment tax, a dimension where individual tax rates are increasing, a dimension with lower corporate tax rates.
That’s a signpost up ahead. Your next stop – The C-Corp Zone. (cue opening music)
Wait a minute….I thought C-Corps went out with bobby socks and tail fins?
Could it be that what was down is up? What was old is new?
Submitted for your consideration:
The increase in Social Security and Medicare payments to an aging population has Congress scrambling for funding alternatives. An idea generating increasing discussion is that of subjecting all income from passthrough entities to self-employment tax. This is especially true for S-Corp income.
While we may hope that individual tax rates remain relatively low, the growing consensus is there could be an increase on individual tax rates – possibly significantly.
The United States has the highest corporate tax rates of all our significant trading partners. With a political climate aimed at keeping jobs and profits in the U.S., there will be much pressure to reduce U.S. corporate tax rates.
We are moving into a land of both shadow and substance, of things and ideas. With the flared-fendered grace of a ’59 Ford, we could be crossing over into the C-Corp Zone.
Although requiring more maintenance and not as nimble as their LLC, Partnership and S-Corp cousins, relatively lower tax rates and better fringe benefits may warrant a second look at the C-Corp. C-Corp double taxation and excess accumulated earnings issues require long-term planning to avoid.
If you have crossed over into the Twilight Zone of business entities, give us a call. We know the way through. (cue closing music)
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