Plan your expenses and deductions strategically each year
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Maintain accurate and organized financial records for easy reporting
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Talk to a tax professional for expert guidance
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Personalized Marketing: AI helps in analyzing customer data to create personalized marketing campaigns
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Use accounting and tax software to make management easier
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Entity Restructuring Strategies That Saved One California Client $30,000+ in Taxes
Most California business owners form an entity once — and never revisit it again.
But as profits grow, the wrong structure can quietly drain tens of thousands of dollars a year in unnecessary taxes.
At PacificWestTax, we help successful entrepreneurs and professionals optimize their entity structure so it works forthem, not against them.
Why Your Entity Choice Matters
Your business entity — whether it’s an LLC, S-Corp, C-Corp, or partnership — determines how your income is taxed, how you pay yourself, and what you owe in self-employment taxes.
The IRS and California Franchise Tax Board treat each entity differently, and the wrong setup can quietly cost serious money.
Case Study: The $30,000 Problem
One Los Angeles marketing firm owner earning about $400,000 annually was operating as a single-member LLC.
They were paying self-employment tax on nearly all their income, plus California’s high state rate.
After reviewing their returns, we restructured the business as an S-Corporation and set a balanced owner salary with distributions.
Result:
- Over $30,000 in tax savings in the first year
- Clear separation between payroll and profit
- Lower audit exposure through compliance planning
That’s the power of proactive restructuring.
When to Consider Restructuring
You should revisit your entity setup if:
- Your business now earns more than $200K per year
- You’ve added partners, investors, or new revenue lines
- You started as a sole proprietor or single-member LLC
- You plan to expand, hire, or eventually sell
The earlier you adjust, the more flexibility and savings you can capture.
S-Corp vs. LLC: The California Perspective
Here’s how the two most common structures compare:
- LLC:
- Profits pass through to your personal return and are fully subject to self-employment tax.
- You’ll also pay California’s annual $800 franchise fee and, in some cases, a gross-receipts fee.
- S-Corporation:
- Lets you split income between salary (subject to payroll tax) and distributions (not subject to self-employment tax).
- You’ll still owe California’s $800 fee plus a small 1.5% state tax on net income, but overall savings can be significant.
For most profitable service businesses in California, the S-Corp election pays for itself quickly.
The Power of Entity Layering
As businesses scale, advanced owners often add multiple entities for strategic benefits — for example:
- A holding company that owns intellectual property or equity
- An operating company that runs daily business activity
- A management company that centralizes payroll or admin costs
This “layered” approach improves asset protection, profit allocation, and state tax efficiency — especially for high-income Californians.
How PacificWestTax Helps
Our firm provides custom entity restructuring strategies built around your income, goals, and risk profile.
We:
- Review your existing entity and prior tax returns
- Model the projected savings from alternative structures
- Handle filings, elections, and compliance updates
- Integrate the structure into long-term planning for expansion or exit
We don’t just file forms — we design tax-efficient frameworks for your future.
Key Takeaways
- The wrong entity structure can cost California business owners tens of thousands per year.
- Converting to an S-Corp often reduces self-employment tax for earners above $200K.
- Multi-entity setups enhance protection and tax flexibility.
- Periodic reviews ensure your structure evolves with your business.