Our innovative and proprietary Business Tax Minimization Structuring System™ will systematically determine and recommend the most tax-optimized structure for your specific business situation that will minimize taxes.
First, we’ll explain why it’s so important.
Next, you’ll be taken to a short Questionnaire that will give us the information we need to determine the custom-designed business structure that is the right fit for your situation to minimize your taxes.
The LLC Myth is the extremely common misconception that an LLC is the holy grail of entity choice for owning a business.
While LLCs can be very useful for many situations, the harsh reality is that the typical LLC is almost always the worst tax structure for a business owner.
The LLC Myth is costing 99% of unsuspecting business owners a lot of money every year in unnecessary taxes.
When forming a business, there are two important aspects to consider: (1) liability protection, and (2) the tax efficiency of the entity structure.
An LLC can provide personal liability protection, but the vast majority of LLC business owners are paying way too much in tax and they have no idea.
Most people don’t realize that there are literally hundreds of different ways to design LLCs. The different design variations all have different purposes that are useful for different use cases.
As experts in business tax structuring, we leverage highly technical legal and tax nuances of the many design variations of both LLCs and corporations to produce optimal tax outcomes.
We also leverage Tax Code Section interactions and disconnects to engineer structures that produce dramatically better tax outcomes.
We thoughtfully engineer custom-designed business structures that are optimized to minimize taxes as much as legally possible while also maintaining compliance with IRS rules and safeguarding you with liability protection from the business operations.
Many business owners form a single-member LLC because it is simple, inexpensive, and provides liability protection. They often form it online themselves.
Unfortunately, what most of these business owners don't realize is that an LLC is often the most expensive tax structure they could have once the business becomes profitable.
The result?
Paying the IRS thousands—or even tens of thousands—of dollars in unnecessary taxes every year.
By default, the IRS treats a single-member LLC as a "disregarded entity."
That means that the IRS ignores the LLC for income tax purposes and treats the business owner and the LLC as the same taxpayer.
This tax treatment causes all business income to flow directly onto the business owner's personal income tax return on Schedule C for sole proprietorships.
Sounds Simple, But...
There is a big downside:
All of the business profit is subject to self-employment taxes.
The excessive self-employment tax problem can sometimes be partially mitigated by making an "S Election" for the LLC causing it to become taxed as an S Corporation from that year forward.
The upside - if you convert an LLC to an S Corporation the IRS then no longer ignores the LLC and instead treats the business owner and the LLC as separate taxpayers with the LLC being treated for tax purposes as if it were an S Corporation.
Sounds Simple Again, But...
There are three big downsides:
1. More self-employment tax can be eliminated with a better engineered structure.
2. Larger 20% QBI tax deductions can be available to significantly reduce regular income tax with a better engineered structure.
3. Virtually all LLCs (and all DIY LLCs) that elect to be treated as S Corporations are technically ineligible to be an S Corporation. The IRS may decide someday to attack all of these LLCs ... it could get ugly with back taxes, penalties and interest being owed for several years.
Most business owners focus on income taxes.
However, income taxes are only part of the picture.
Self-employment taxes are essentially the business owner’s version of Social Security and Medicare taxes.
The self-employment tax generally equals:
Combined, many business owners pay approximately:
15.3% Self-Employment Tax on all of their business profits on top of regular income taxes.
When operating as a default single-member LLC:
In many cases, every additional dollar of profit creates:
Single-Member LLC
Business Profit = $200,000
The business owner owes:
The self-employment tax burden alone can be thousand and even tens of thousands of dollars.
Most business owners are shocked when they discover how much of their annual tax bill is attributable to self-employment taxes rather than income taxes.
In 2017, Congress created the Qualified Business Income (QBI) Deduction under Tax Code Section 199A.
This very generous deduction allows eligible business owners to:
This deduction can create enormous tax savings.
Unfortunately, most business owners never receive strategic planning around maximizing this large, gratuitous tax deduction.
Assume a business generates:
$250,000
of profit that is Qualified Business Income (QBI)
20% QBI Deduction =
$50,000
That means that the owner will only pay federal income tax on:
$200,000
instead of the full $250,000 of profit.
For most business owners, this gratuitous deduction is one of the most valuable tax benefits available.
Your entity structure directly impacts:
Without proper planning, business owners almost always pay significant unnecessary taxes to the IRS.
The most successful business owners invest in tax-efficient structures that help them:
By separating compensation from distributive income.
Through thoughtful compensation and entity planning.
By implementing a structure designed around tax optimization rather than convenience.
By creating a more sophisticated framework for ownership, management, and tax planning.
Most business owners remain in a default LLC structure for many years because:
The reality is that LLCs can provide excellent liability protection, but the typical LLC is often the worst and most expensive tax structure.
A structure that may have worked fine initially when the business was just getting started and not making any profit may be costing significant money when the business earns $50,000, $100,000, $200,000, or more.
Wheter you’re just starting a new business or you already have an existing business, the question isn’t whether an LLC provides liability protection.
The question is whether your tax structure is helping—or hurting—your ability to build wealth.
For existing buisnesses it’s not too late. An existing business can be changed to deploy a new tax structure that solves these big problems for the many years to come.
At Ethos, we strategically analyze:
so that your business structure works as hard as you do.
First Steps. The Questionnaire will first take you through a series of questions that ask you to provide needed personal and business information, such as your name, contact info, and some general information about the type of business you’re starting.
Last Steps. As you fill out the Questionnaire, you may think of some questions you want to ask or additional information you want to tell us about. At the end of the Questionnaire you will have the opportunity to: