If you've been looking for a reason to launch your startup then this may be your year. With stocks at all-time highs and the Trump tax cuts effective January 1, new, small businesses might enjoy easier access to capital and more free cash flow from tax savings. Even a few of the largest U.S. banks have promised to share their tax savings by lending more^1. The tax changes include a new "passthrough break" for some sole proprietors, S-corporations, and other pass-through entities^2. The deduction could be 20% if you qualify.
Of course, it depends on what type of business you're opening. C-corporations are not pass-through entities and are not entitled to the passthrough break, but they do now enjoy a lower corporate tax rate of 20%, cut from 35%.
If you're currently deciding on how to form your business, take the time to do the research and consider the pros and cons of each strategy. If you're raising capital, you can have 100 shareholders (investors) as an S-corporation and may still benefit from the new pass-through deduction.
The cost of borrowing money to fund your business is less likely to be fully deductible and companies with a lot of debt may face an even deeper wall of worry.^3 Crafting company stock as a compensation and profit sharing tool didn't go away with the final version of the tax bill and could be a good strategy.
If you're raising capital for your new business you could include a speech to potential investors about the bull market being in its 9th year and that your new venture is an opportune time to invest. Small businesses don't correlate with stocks and can be very profitable for early investors as they carry the most risk.
At Eureka Wealth Management, I coordinate with your tax and legal advisors when determining the right structure for your business. I help owners understand capital and cash flow so they can grow in the right direction. I also set up the health, disability, other benefits, and retirement plans for companies. Call today at (760) 537-0791 or visit eurekawealthmanagent.com.