Slack pursued an unusual direct listing, meaning it did not have banks underwrite the offering.CNBC Disruptor 50read more
Slack's CEO said that the company didn't want to go public via an IPO so that it could be as transparent and accessible as possible.Deals and IPOsread more
Oil jumped as much as 6% on Thursday after Iran shot down a U.S. military drone, prompting President Trump to blast Tehran on Twitter.Energy Commoditiesread more
President Trump says Iran may not have intentionally downed an unmanned U.S. surveillance drone.Politicsread more
For doubters thinking the rally is just a last gasp of the decade-long bull market, chart analysts are here to prove them wrong.Marketsread more
Notorious "pharma bro" Martin Shkreli has reached a settlement with his former biopharmaceutical company Retrophin just weeks ago after he sued two company directors and its...Biotech and Pharmaceuticalsread more
"The slowdown in the global economy is reaching this shore," veteran trader Art Cashin says.Economyread more
Slack's public market debut on Thursday will generate billions for venture firm Accel and healthy returns for Andreessen Horowitz and Social CapitalTechnologyread more
JetBlue is ordering the longest-range Airbus jets to expand service to more European cities.Airlinesread more
Apple announced on Thursday that it will recall some 15-inch MacBook Pro laptops because they have batteries that may "overheat and pose a fire safety risk."Technologyread more
Health-care stocks have caught a cold this year, but one technical analyst sees the beginnings of a recovery.Trading Nationread more
Lower income tax rates have made incorporation an attractive strategy to some business owners, but accountants warn that entrepreneurs ought to think twice before going corporate.
The Tax Cuts and Jobs Act sought to ease taxes on businesses in two ways.
One provision makes available to entrepreneurs a 20 percent deduction on qualified business income. This break is for pass-through entities — including sole proprietorships and S-corporations.
Business owners who wish to qualify for the full deduction must have taxable income below $157,500 if single, or $315,000 if married.
Entrepreneurs whose income exceeds those thresholds hope to take advantage of a different provision in the new tax law. This one lowers corporate tax rates to 21 percent from the top rate of 35 percent.
Here's the catch: They'd have to convert their pass-through entity to a C-corporation.
"The minute the law was passed, people said, '21 percent? Great. We're gonna convert,'" said Carolyn Mazzenga, office managing partner and CPA for Marcum LLP in Melville, N.Y.
"We basically had to slow people down and say, 'Let's talk about this,'" she said.
Here's why rushing to turn your business into a C-corp may be a costly mistake.
S-corps and other pass-through entities are known as such because their income "passes through" to the owner and is taxed at his or her individual rate, which is as high as 37 percent.
C-corps, however, file their own income tax returns and are subject to a corporate tax rate, which is now as high 21 percent.
Both C-corps and S-corps provide entrepreneurs with limited liability protection, meaning that the creditors of the business can't seize the personal assets of the owners — as long as the owners adhere to certain filing and reporting requirements.
"For those who don't qualify for the 20 percent break, the C-corporation has closed the gap quite a bit in the form of a lower tax rate," said Tim Steffen, CPA and director of advanced planning at Robert W. Baird & Co. in Milwaukee.
But there is more to the story than just the reduced corporate tax rate, he said. That's because owners of C-corps are dealing with two tiers of taxes related to their business.
Income generated by the business is subject to the 21 percent rate. If the owner wishes to tap any of that business income, he needs to take a dividend and pay a rate of up to 20 percent.
If this same owner decided to keep his business as an S-corp and he failed to qualify for the 20 percent business income deduction, he'd only be on the hook for a top individual income tax rate of 37 percent.
"The rates are almost the same for the pass-through at the top income tax bracket and the C-corp," Steffen said.
Think carefully about the future of your business, particularly in the next five to 10 years, before you convert to a C-corp.
"Selling a C-corp can become very tax-expensive," said Mazzenga at Marcum.
This is because owners face a double tax once they sell the assets of the company: First, they pay the corporate rate of 21 percent, and then owners cough up a 20 percent tax for distributions they receive.
Have a chat with your CPA before you move forward on changing the entity of your small business. You'll likely need a projection to see how your tax picture will change under a different business structure.
Consider these questions as you proceed:
"It's easy to say that you won't care what the tax is when you sell the business — until the time comes and you're like, 'Wow,'" Mazzenga said.
"This really forces the business owner to think about things they weren't necessarily honing in on," she said.