What tax law changes can we expect for 2009? I wish I knew. Some of the things we’ve already seen are pared back tax incentives that been discussed during the campaign year. These include: Net Operating Loss carry-back, Section 179 increase and bonus depression.
Pres Obama is talking about additional changes for corporation and with the $52 trillion deficit in Social Security and Medicare we can expect changes there too.
The best strategy right now is to stay flexible with layered business structures. For example, if you have a partner in your business, the best strategy is to have an LLC with default taxation. This means it will taxed as a partnership. Then make sure your personal interests are protected with a separate business structure that is set up just for the purpose of holding that interest in an LLC. If you hold your interest inside another active business, you run the risk of liability and more complicated tax situations down the line.
If it’s a business interest, for example, your interest inside the operating LLC is held by an LLC that might elect to be taxed as an S Corporation. Your partner may hold his interest inside an LLC that has elected to be taxed as a C Corporation.
The downside of this is that there are now 3 different tax returns that must be filed. The positive is that you have good asset protection and the maximum flexibility. It works now and it can change easily if tax laws dramatically change.
That’s just one of the layered Business Structures that are discussed as part of the Before You File: Last Minute Tax Tips for Business Owners and Investors.