How does tax reform affect entity choice?
Changes in business income tax provisions — including a permanent reduction in tax rates for C corps and the creation of a completely new but temporary qualified business income deduction for pass-through businesses — may translate into an opportunity to switch entity types. But be careful: there are advantages and disadvantages for each beyond the tax rates.
And while having a clear tax strategy and running detailed projections were important before tax reform when making entity choice decisions, those behaviors are even more important now. The situation can get even more complicated once you start thinking about taxing current operating income, how distributions are taxed, and how entities are treated on an exit by sale or otherwise.