Entity Selection & Tax Structuring

Entity structure is usually decided once, early, on limited information — often by whoever set up the company, sometimes by a template, occasionally by a friend who had heard S-corps save tax.

Then the business changes. Revenue triples. A second location opens. Real estate gets bought. A partner comes in, or leaves. The structure that was reasonable at formation quietly stops being reasonable, and because nothing visibly breaks, nobody revisits it.

The decision, made properly

There is no universally correct entity. There is a correct entity for a specific profit level, ownership group, risk profile and time horizon.

We work through it in that order. How much profit is the business actually generating, and how much of it comes out to the owners? Who owns it now, and who might own it in five years? What liability is genuinely being carried, and by which activity? Is there an exit in view, and what shape would it take?

Only then does the entity question have a real answer — and often the answer involves more than one entity, arranged deliberately.

Reasonable compensation, documented

The most common structuring error we see is an S-corp owner paying themselves too little.

The saving is real: distributions above a reasonable salary avoid self-employment tax. But “reasonable” is a legal standard, not a preference, and the IRS has been willing to recharacterise aggressive positions — with back tax, interest and penalties attached.

We set the figure using comparable market data for the role actually being performed, and we document the reasoning. If it is ever questioned, there is a file to point at.

Multi-entity structures

Businesses accumulate entities. An operating company, a property-holding LLC, a management company, an entity from a venture that did not work out.

Each one is a separate filing, often a separate payroll registration, and always separate books. Some earn that overhead by segregating genuine liability or separating ownership groups. Others are historical accidents that cost several thousand dollars a year to maintain.

We map what exists, identify what each entity is actually accomplishing, and recommend consolidation where the structure is costing more than it protects.

Getting real estate right

Real estate held in the wrong entity is a recurring and expensive mistake — for liability exposure, for the ability to refinance, and for what happens on sale or on death.

Because we work extensively with real estate owners, this comes up constantly, and the fix is nearly always cheaper before a transaction than after one.