Entity Restructuring Saves Manufacturing Company $127,000
How strategic S-Corp election and compensation planning transformed a growing manufacturer's tax situation.
Executive Summary
A growing manufacturing company operating as a sole proprietorship was paying excessive self-employment taxes on their business income. After analyzing their situation, we implemented an S-Corporation election combined with a reasonable compensation strategy, resulting in first-year tax savings of $127,000.
[Detailed executive summary to be provided by client]
The Challenge
The client, a successful manufacturing business owner, faced several tax challenges:
- All business income was subject to self-employment tax (15.3%)
- No distinction between active income and return on capital
- Limited retirement plan contribution options
- [Additional challenges to be provided]
[Detailed challenge description to be provided by client]
Our Approach
We conducted a comprehensive analysis of the client's business operations, income patterns, and long-term goals. Our recommended strategy included:
Phase 1: Entity Analysis
Evaluated the tax implications of various entity structures including S-Corporation, C-Corporation, and maintaining sole proprietorship status.
Phase 2: S-Corp Election
Implemented S-Corporation election with proper documentation and compliance procedures.
Phase 3: Compensation Planning
Established reasonable compensation based on industry benchmarks and IRS guidelines, balancing tax efficiency with compliance requirements.
[Detailed approach to be provided by client]
The Results
[Detailed results to be provided by client]
Key Takeaways
Entity structure significantly impacts tax liability for profitable businesses.
Reasonable compensation planning requires careful analysis and documentation.
Proactive tax planning creates opportunities that reactive filing cannot capture.
Quick Facts
- Industry
- Manufacturing
- Company Size
- [To be provided]
- Tax Savings
- $127,000
- Strategy Used
- S-Corp Election + Compensation Planning
- Timeline
- [To be provided]
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