By Stanley M. Vasiliadis, Esquire,
Professionals, small business owners and tax advisors for both of these groups are all scrambling to make sense of the sweeping new rules regarding pass-through entities, codified as section 199A of the Tax Cuts and Jobs Act (TCJA). This provision establishes a new 20% deduction for small business. It was created so that big business, which got a large tax cut, would not be the only one to benefit from the new law. For many Pennsylvania small business owners and self-employed professionals, the “LLC”, shorthand for Limited Liability Company, is preferred over other types of business entity. As the name implies, an LLC shields its owners from liabilities incurred by the business, similar to the protection available to corporate owners. But an LLC is generally easier and less expensive to set up and maintain. And it also allows the owner to elect which form of business entity taxation applies – sole proprietorship, partnership, “C” corporation, or Subchapter S corporation. But now, deciding what form to elect has become a lot more complicated. Many may now find Subchapter S or C corporation treatment to be a more advantageous alternative. For more on what this all means, check out a recent article in Forbes and another in Taxprotoday.