Chapter 7
The Business Owner’s Tax Architecture

A paycheck is taxed before you ever see it. Withholding happens at the source, the rate schedule is fixed, and your planning amounts to a handful of deductions and the choice of which retirement account to fund. A business is different. The owner chooses the entity, the timing, the mix of salary and profit, and the deductions — and each of those choices carries a tax consequence measured in real money. None of this is evasion; it is the plain fact that the code treats wages and the return on a venture as two different kinds of income, taxed on entirely different terms.

This chapter is about making those choices deliberately. It moves from the foundational question — are you even running a business — through entity selection, the IRC §199A, “Qualified business income” deduction, the IRC §1202, “Partial exclusion for gain from certain small business stock” exclusion that can make a company sale almost entirely tax-free, the pass-through workaround for the SALT cap, the operating deductions most owners leave unclaimed, and finally the exit. Run a business without a framework for these decisions and you will overpay, quietly, every year.

Hobby or Business?
Choosing a Business Entity
The Sole Proprietorship and the Single-Member LLC
Multi-Member LLC and Partnership
Professional Entities
The S-Corporation Election
Reasonable Compensation and the Break-Even Point
The C-Corporation
Conversion and Election Timing
Multi-Entity Structures: HoldCo, OpCo, and Series LLC
Entities With a Special Tax Regime
The Common Case: One or Two Founders
Business Tax Returns and Deadlines
Standing Up the Business
The Qualified Business Income Deduction
Qualified Small Business Stock
The Pass-Through Entity Tax
Operational Deductions and Family Employment
Paying for Work: Payroll and Information Reporting
Retirement Plans for the Self-Employed
Selling or Passing On the Business
Employee-Ownership Exits
Putting It Together