SOURCE: Marks Paneth & Shron LLP

Marks Paneth & Shron LLP

August 19, 2013 10:30 ET

A Word to Wise Business Owners: Don't Jump to "C" Corp Classification Just Because Personal Tax Rates Rose

Owners of Growing Companies May Be Best Served by Retaining Their "S" Corp Designation, so They Can Continue to Defer Revenue and Avoid Double Taxation, Says Video From Marks Paneth & Shron

NEW YORK, NY--(Marketwired - Aug 19, 2013) - The passage of the American Tax Relief Act raised tax rates for some high-income individuals and has owners of some growing businesses thinking they should change their company's designation from an "S" corporation to a "C" corporation, in which profits don't automatically flow through to the owners.

But smart business owners will avoid this knee-jerk reaction. A video from John Evans, Partner in Marks Paneth & Shron's Tax Group, explains the reasons why owners of growing companies may best be served by retaining their "S" corporation -- or flow-through -- designation, despite the new 39.6% marginal tax rate for individuals. Benefits include:

  • Avoiding double taxation. Income earned by an "S" corporation flows straight through to the owners who pay the income taxes on these amounts.

  • Selling the assets of the business. If an "S" corporation finds a buyer, its shareholders are required to pay income taxes on the appreciation of the assets of the business, and the corporation is generally not subject to a corporate-level tax.

The video urges owners of growing businesses to think twice before changing the designation of their company. Simply considering higher marginal tax rates is not the best way to evaluate whether the business should be, or remain, an "S" corporation or "C" corporation.

The video can be viewed here: http://www.markspaneth.com/publications/the-advantages-of-an-s-corp-vs.-a-c-corp.

For more information, or to speak with John Evans, please contact Katarina Wenk-Bodenmiller of Sommerfield Communications, Inc. at (212) 255-8386 or Katarina@sommerfield.com.

About Marks Paneth & Shron LLP

Marks Paneth & Shron LLP is an accounting firm with over 500 people, of whom nearly 65 are partners and principals. The firm provides public and private businesses with a full range of auditing, accounting, tax, consulting, bankruptcy and restructuring services as well as litigation and corporate financial advisory services to domestic and international clients. The firm also specializes in providing tax advisory and consulting for high-net-worth individuals and their families, as well as a wide range of services for international, real estate, media, entertainment, nonprofit, professional and financial services, and energy clients. The firm has a strong track record supporting emerging growth companies, entrepreneurs, business owners and investors as they navigate the business life cycle.

The firm's subsidiary, Tailored Technologies, LLC, provides information technology consulting services. In addition, its membership in Morison International, a leading international association for independent business advisers, financial consulting and accounting firms, facilitates service delivery to clients throughout the United States and around the world. Marks Paneth & Shron LLP, whose origins date back to 1907, is the 32nd largest accounting firm in the nation and the 16th largest in the New York area. In addition, readers of the New York Law Journal rank MP&S as one of the area's top forensic accounting firms for the third year in a row.

Its headquarters are in Manhattan. Additional offices are in Westchester, Long Island and the Cayman Islands. For more information, please visit www.markspaneth.com.

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