Other forms of pass-through restructuring may be safer for your clients, with tax drawbacks. In Smith’s example, for instance, the lawyers could found a C corporation, but such entities allow no QBI deduction for any income and the double-taxation of income earned by C corporations would deplete after-tax cash for each attorney.
“Any of these actions require a deep analysis, not only from a tax perspective, but from a governance, economic, generational and succession perspective,” Gillen said.