To be or not to be, that is the question. (incorporating) (Federal Taxes)

Why is your client incorporated? Do the costs of remaining a corporation outweigh the benefits? Should your client liquidate his corporation?

Like the "Baby Boomers," corporations were often born because of romance rather than thoughful planning. The primary advantage of incorporating is liability protection. If counsel advises incorporation to protect the client from our litigious society, the corporation is valuable no matter the tax costs--no questions asked.

However, if liability is not the issue, the tax advantages of incorporating have dwindled. Benefit plans, such as health insurance, disability insurance, life insurance (to $50,000) and child care assistance plans provided by the C corporation, are paid with pretax dollars. For a corporation that is not a personal service corporation, the fiscal year and the graduated brackets of the corporation allow income shifting asset building at lower after-tax …