Entity Selection & Structuring
The entity you choose has a direct and lasting impact on your tax liability, personal liability exposure, and operational flexibility. I analyze your situation and recommend the best fit.
Sole Proprietorship / Single-Member LLC
The simplest business structure. Income is reported on Schedule C of your personal return. Easy to maintain, but you pay self-employment tax on all net profit and have limited liability protection without proper LLC formation.
Advantages
- Simple formation and minimal compliance
- Direct pass-through to personal return
- Full control over business decisions
Considerations
- Self-employment tax on all net profit (15.3%)
- Limited options for tax reduction strategies
- Personal liability risk without LLC formation
S-Corporation
An S-Corp election lets the business split income between salary (subject to employment tax) and distributions (not subject to employment tax). This can produce significant tax savings for profitable businesses.
Advantages
- Potential self-employment tax savings of thousands annually
- Pass-through taxation avoids corporate double taxation
- Established credibility with clients and vendors
Considerations
- Reasonable compensation requirement must be met
- Payroll processing and quarterly payroll tax filings
- More complex compliance and record-keeping
C-Corporation
A separate tax entity that pays its own income tax at a flat 21% rate. Subject to double taxation on dividends, but C-Corps offer advantages for businesses that retain significant earnings or plan to seek outside investment.
Advantages
- Flat 21% corporate tax rate
- Retained earnings not subject to self-employment tax
- Most flexible for outside investment and stock options
Considerations
- Double taxation on distributed earnings
- More complex tax compliance requirements
- Less flexible for distributing cash to owners
Partnership / Multi-Member LLC
A pass-through entity where income, deductions, and credits flow through to individual partners. The partnership files an informational return (Form 1065), and each partner receives a Schedule K-1.
Advantages
- Flexible allocation of income and losses among partners
- Pass-through taxation with no entity-level tax
- Can be combined with S-Corp election for tax savings
Considerations
- General partners subject to self-employment tax
- Complex partnership tax rules and allocations
- Requires formal partnership or operating agreement
S-Corp Optimization
For many profitable small businesses, electing S-Corp status is the single most impactful tax savings strategy available. When structured correctly, an S-Corp can save business owners thousands of dollars in self-employment taxes each year.
The IRS closely scrutinizes S-Corp salary payments. Setting compensation too low can trigger audits, penalties, and reclassification of distributions as wages. I help you find the optimal balance: maximum savings, fully defensible.
Self-Employment Tax Savings
As a sole proprietor, you pay 15.3% self-employment tax on all net profit. With an S-Corp, you pay employment tax only on your reasonable salary, and the remaining profit passes through as a distribution free of self-employment tax.
Reasonable Compensation Analysis
The IRS requires S-Corp owner-employees to pay themselves a reasonable salary based on the services they perform. I analyze industry data, geographic factors, and your role to determine a defensible salary that maximizes tax savings.
Qualified Business Income Deduction
The Section 199A deduction allows eligible business owners to deduct up to 20% of qualified business income. Proper S-Corp structuring and compensation planning directly affects this calculation.
Estimated Tax Services
- Quarterly estimated tax payment calculations and scheduling
- Safe harbor analysis (prior year vs. current year method)
- Cash flow optimization to prevent overpayment or underpayment
- State estimated tax requirements for Michigan and other states
- Annualized income installment method for uneven income patterns
- Penalty avoidance strategies for fluctuating business income
Estimated Tax Planning
Business owners and self-employed individuals are required to make quarterly estimated tax payments to both the IRS and the State of Michigan. Underpaying results in penalties. Overpaying ties up cash that could be working for your business.
I calculate your estimated payments each quarter based on actual income and deductions, ensuring you meet safe harbor thresholds without overpaying. For businesses with seasonal or irregular income, I use the annualized income installment method to align payments with your cash flow.
Retirement Plan Strategies
Retirement contributions are among the most powerful deduction tools available to business owners. The right plan can shelter tens of thousands of dollars from tax while building retirement security.
SEP-IRA
Up to $69,000 in 2024Contribute up to 25% of net self-employment income (up to the annual limit). Simple to establish and maintain, with contributions made entirely by the employer. Ideal for self-employed individuals without employees.
Solo 401(k)
Up to $69,000 plus catch-upAllows both employee deferrals and employer profit-sharing contributions, often enabling higher total contributions than a SEP-IRA at the same income level. Available to owner-only businesses with no full-time employees other than a spouse.
Defined Benefit Plan
Potentially $250,000+ annuallyFor high-income business owners seeking maximum tax deductions, a defined benefit plan can allow contributions significantly exceeding 401(k) limits. Actuarially determined contributions reduce taxable income substantially.
Cash Balance Plan
Customizable contribution levelsA hybrid plan combining features of defined benefit and defined contribution plans. Provides predictable employer contributions with higher contribution limits, often paired with a 401(k) for maximum tax deferral.
Outside my legal practice
I advise on which plan type fits your tax situation and the contribution and deduction rules. I do not select investments, manage assets, or administer the plan. For choosing investments inside the plan or ongoing plan administration, I can refer you to a licensed financial advisor or third-party plan administrator.
Payroll Tax Compliance
Payroll taxes are among the IRS's highest enforcement priorities. Failure to withhold, deposit, and report payroll taxes properly can result in severe penalties, including personal liability for the Trust Fund Recovery Penalty.
I make sure your business meets all federal and Michigan payroll tax obligations, properly classifies workers, and files returns on time. If you are already facing payroll tax issues, I can represent you before the IRS to resolve the matter and minimize penalties.
Payroll Tax Services
- Federal and Michigan payroll tax registration and setup
- Quarterly payroll tax returns (Form 941) and annual returns (Form 940)
- W-2 and 1099-NEC preparation and filing
- Worker classification analysis (employee vs. independent contractor)
- Payroll tax penalty resolution and deposit penalty abatement
- Michigan unemployment insurance compliance
Outside my legal practice
This covers payroll tax compliance, worker classification, and resolving payroll tax problems with the IRS. It does not include running your day-to-day payroll or bookkeeping. For ongoing payroll processing, I can refer you to a payroll service or bookkeeper.
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