Understanding New Tax Laws and Regulations

There have been many articles and news outlets discussing the change in tax laws and regulations for this tax season. Recent changes in tax laws have introduced new regulations that businesses need to be aware of. The IRS updated standard tax deduction amounts and marginal tax rates for 2025. Different business entities have specific filing requirements. Choosing the right business structure is crucial as it affects tax obligations, personal liability, and operational flexibility. Consulting with legal and financial advisors can help business owners select the best structure for their needs. 

It is important to start the new tax season off with the correct business structure that helps with your tax implications for your business. 

Sole Proprietors

Whether you are a sole proprietor, partnership, corporation, or LLC, there are certain ways to report income on your tax return. Sole proprietorships own an unincorporated business and use Form 1040 for their individual tax returns. Sole proprietors have several tax implications such as self-employment taxes, income tax, and estimated quarterly tax payments. Any business profits cover Social Security and Medicare contributions. 

As a sole proprietor, you can deduct various business expenses such as office supplies, travel, and advertising. Estimated tax payments must be made throughout the year to avoid penalties. It’s important to understand compliance and help your tax situation.

Especially if you’re a sole proprietor, you need to make sure that you have a great attorney and tax advisor to help you plan for tax season. It can be easy for these obligations to be out of sight out of mind until they are due with the federal government, but having the right team behind you can help make sure that you have everything planned out in advance, you have your ducks in a row, and you can focus on running the day to day operations of your business instead of worrying about taxes and your business structure.

Partnerships

With partnerships, you are considered a tax-through entity and don’t pay income tax. Profits and losses are passed through to the individual partners who then report them on their personal tax returns using Schedule K-1 (Form 1065). How your partnership agreement is written is how your income, deductions, and credits are determined.

Partnerships have to file an annual formation return through form 1065 to show the business’s financial activity. If your business has employees, partnerships will pay employment taxes that include Social Security and Medicare. 

Like with sole proprietorships, partners should be meeting regularly with their accountant, attorney, and tax advisor to make sure that all of their obligations are met. The major difference with partnerships is that these meetings with your accountant, attorney, and tax advisors will follow the tax structure outlined in your specific business formation and partnership agreement so it’s important to make sure that all of the partners are involved in these meetings and understand what actions their business needs to take to stay in compliance.

S Corporation

Like partnerships, S Corps are also considered a tax-through entity and any income, profits, losses, credits, and deductions pass through the shareholders who report on their personal returns.

To avoid what’s called double taxation, S Corps don’t pay federal income tax on the corporate level. There are a few forms that S Corps utilize, which is Form 1120-S and Schedule K-1 for each shareholder that details their share of the corporation’s income, deductions, and credits. Any shareholder-employees must receive compensation for services rendered, which is subject to standard payroll taxes.

LLCs

Finding the right business structure is crucial to help tax implications. There are four LLC tax benefits to be aware of when forming an LLC. Tax Flexibility, Avoiding Double Taxation, QBI Deductions, and Business Deductions. As an LLC, there are flexible taxation options and LLCs can choose if they want to be taxed as an S Corp, C Corp, or Sole Proprietorship. Single Member LLC’s are taxed as Sole Proprietors and Multi-Member LLC’s are taxed as partnerships.

If your business is structured as an LLC that files as a partnership then your tax implications are the same. LLC’s are subject to self-employment taxes on their share of income. If an LLC has employees, it must collect payroll taxes, including Social Security and Medicare taxes.

If you are ready to form your new business structure and need a great team behind you to help with the process from A to Z, our team is standing by to make sure that you get your new business docs done right and fast so you can get to work!

Here’s what one of our recent customers, Tiffany, had to say about working with our team to start her business! “They had the best prices, a ton of upgrades, and when you call you always speak to someone who is knowledgeable and your question is answered. I recommend MyCorporation to everyone!”

We also help with your one time business filings, business maintenance, annual reports, amendments, and payroll to make sure you have the resources you need to succeed. If you’re ready to start your new business, just go to www.mycorporation.com/business-formations.

If you are looking for other helpful information for running the day to day operations of your business, our blog is full of useful information covering the current political environment and its impact on your business, marketing strategies to help you succeed, and so much more! We update these items weekly to make sure you stay up to date as a business owner and can stay ahead of your competition. Read our business blog here.

Conclusion

Understanding the recent changes in tax laws and regulations is essential for businesses as they go through the new tax season. The IRS has updated standard tax deductions and marginal tax rates for 2025, and different business entities have certain filing requirements. Choosing the right structure is crucial because it affects tax obligations and personal liability. Consult with MyCorporation and trusted financial advisors to get the help you need and choose the right structure for your needs.