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Q.Does incorporating a small business offer tax breaks?
A.Maybe yes and maybe no. Most tax benefits flow to profitable, established corporations, not to start-ups. Corporations do have the ability to split income between a corporation and its owners such that some income can be kept in lower corporate tax brackets. Corporations can also offer greater medical deductions than sole proprietors or partnerships (100% versus 60%). However, incorporating does add state fees, as well as legal and accounting charges. Unless there are sunstantial profits, there may not be any tax advantages to incorporating.
IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained on this web site is not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed on a taxpayer under the U.S. Internal Revenue Service.
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