Part I: General - The Choice of Entity Decision Prior to 2018 -

Since the reduction of individual tax rates in the 1980’s, the decision of whether to conduct a business in the form of a C corporation or in the form of a “flow-thru” entity (i.e., partnership, limited liability company or S corporation) has been a fairly easy one. Because of the lower individual tax rates, the relatively high corporate tax rate and the “double tax” on C corporations -- (i.e., once at the corporate level and a second time at the shareholder level), distributed profits of a C corporation generally have been subject to tax at rates far in excess of the rates applicable to a flow-thru entity. As a result, a flow-thru entity has almost always been the best structure to use for a non-publicly traded business. (Publicly-traded businesses generally are not eligible for flow-thru treatment.)