Corporations, Partnerships & Trust Tax Lawyer
Choosing a formation type is one of the most important decisions you will make when starting up a new business. Though tax treatment is not the only factor you should consider when weighing your options, it certainly ranks at the top of the list. There are different laws and reporting requirements regarding corporations, partnerships, and trust entities, and you could encounter considerable challenges if you seek to make changes to your tax elections further down the road.
Because tax matters play such a significant role in overall business planning, it is wise to retain knowledgeable legal counsel from the earliest stages of formation. Our team at Lehman Tax Law is dedicated to ensuring you make informed decisions at the outset, and we will be at your side if you run into issues with the IRS. Please contact our office to learn how a corporations, partnerships & trust tax lawyer can be your company’s best asset, and read on for some basic concepts.
Overview of Corporation Taxation
As a result of enactment of the Tax Cuts and Jobs Act of 2017 (TCJA), the highest corporate tax rate is 21 percent – down from a previous rate of 35 percent. All companies organized as C corporations are taxes on profits, which is receipts minus deductions. Allowable deductions include cost of goods, employee compensation, interest, advertising, and depreciation. TCJA also:
- Eliminated the graduated corporate rate schedule and alternative minimum tax;
- Allowed full expensing for most new investment through 2022;
- Reduced net interest expense deductions; and,
- Changed tax treatment for multinational corporations and foreign income.
There is a double taxation imposed upon C corporations, as profits are taxed to the entity AND shareholders also pay on dividends and capital gains. One way to avoid this double taxation is by forming an S corporation, which is considered a pass-through entity. There is no income tax for the organization, but stakeholders pay on their respective shares of company profits.
Taxation of Partnerships
This type of entity is also a pass-through, so the partnership files a return but does not pay taxes on income. Partners include their share of profits on their own individual income tax returns. You may be eligible for certain deductions, so our tax attorneys can assist in determining whether they apply.
How Trust Entities are Taxed
A basic trust involves three key elements:
- A grantor, who creates the trust by transferring property into it;
- A trustee, who manages the trust for beneficiaries; and,
- Beneficiaries, who receive distributions from assets and income according to the trust terms.
If the trustee successfully generates income through management of trust assets, this event could incur income tax liability. The taxpayer who must pay depends upon the specific circumstances of the trust.
Reach Out to a Corporations, Partnerships, and Trust Tax Attorney
This overview of the tax laws that apply to various entity types may be helpful, but the relevant legal concepts are much more complicated in practice. For more information, please contact Lehman Tax Law at 561-368-1113 or via our website. We can schedule a complimentary consultation to discuss your situation with corporations, partnerships, and trust tax attorney Richard S. Lehman.