Waypoints: Ideas and Insights to Navigate Enterprise Complexity

One of the significant changes made by the Tax Cuts and Jobs Act (TCJA) was to slash the top C corporate tax rate from 35% to a permanent flat 21% effective January 1, 2018. Individual tax rates were also lowered but not permanently with the highest tax bracket dropping from 39.6% to 37%. As a result, some S corporation owners may consider converting their business entity type to a C corporation to enjoy the lower 21% tax rate. This conversion decision should not be based solely on the difference in tax rates. Several factors need to be examined, and unfortunately, there is no "one size fits all" answer.