There’s a tax advantage to taking money out of a C corporation as compensation rather than as dividends because a corporation can deduct the salaries and bonuses that it pays executives.
The right entity choice can make a difference in the tax bill you owe for your business. There are plenty of potentially expensive tax problems that you should assess before making the decision to convert from a C corporation to an S corporation.
The Tax Cuts and Jobs Act (TCJA) has changed the landscape for business taxpayers. That’s because the law introduced a flat 21% federal income tax rate for C corporations. Under prior law, profitable C corporations paid up to 35%.
The flat 21% federal income tax rate for C corporations under the Tax Cuts and Jobs Act (TCJA) has been great news for these entities and their owners. But some fundamental tax truths for C corporations largely remain the same.