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United States companies, holding companies and trusts

What each one saves, what it costs to run every year, the point where it starts paying for itself, and where people get caught out. 2025 figures.

A structure is a tool, not a trick. If the yearly cost of running it is bigger than the tax it saves, you are worse off. Nobody should set any of these up in United States without a qualified adviser running your real numbers first.

Build my strategy United States deductions and forms

Real numbers from people using these

Elect S corporation treatment

Your business pays you a reasonable wage, and the profit left over escapes self employment tax.

Often 3,000 to 9,000 a year in payroll tax once profit is well above a fair salary.

$500 to $2,000 to set up, then $1,200 to $3,000 a year.

Worth it when: Usually once net profit passes about 80,000, because payroll and an extra return cost real money.

Dana, 47, consultant in Phoenix, Arizona, $160,000 of net profit

Takes a defensible $90,000 salary and $70,000 as distributions instead of paying self employment tax on all of it.

Around $5,900 less payroll tax. Payroll service and the extra return cost about $2,400, so roughly $3,500 kept, every year.

Rule behind it: Form 2553 election, reasonable compensation rules, 15.3% SE tax saved on distributions

Have an adviser set this one up.

Hold your businesses under one parent company

A parent company owns your operating business and your property, so each one is walled off from the others.

Protects assets, lets one entity's rent or losses meet the other's profit, and makes a future sale far simpler.

$2,000 to $8,000 to set up, then $1,500 to $5,000 a year.

Worth it when: Only once there are two real businesses, or a business plus property, usually above $250,000 of combined profit.

The Okonkwos, Atlanta, Georgia, a $600,000 profit HVAC business and a $900,000 building

The building goes into its own LLC under a parent holding company and charges the trading business $84,000 a year in rent.

The rent is deductible against business profit while the property LLC claims depreciation of about $23,000 a year, so a large slice of the rent lands untaxed. Costs run $3,500 to $13,000 all in.

Rule behind it: Related party rent must be at market rate, self rental rules under section 469

Have an adviser set this one up.

Living trust and lifetime gifting

A trust holds your assets so they pass without probate, and yearly gifts move value out of your estate.

Avoids probate cost and delay, and keeps growth outside a taxable estate.

$1,500 to $5,000 to set up, then $0 to $1,000 a year.

Worth it when: Worth it for most estates above roughly 500,000, sooner in states with slow probate.

Helen, 78, Sacramento, California, estate of $4.2m with rentals in two states

A revocable trust holds the properties, and she gifts $19,000 a year to each of four grandchildren.

Probate on $4.2m in California would run roughly $100,000 in statutory fees and a year of delay. The gifts move $76,000 a year out with no form to file and no lifetime exclusion used.

Rule behind it: 2025 annual gift exclusion 19,000 per person, estate exclusion 13.99m

Have an adviser set this one up.

Every United States structure, with the risks

LLC taxed as a sole proprietor or partnership

Light admin
Best for
Any side business that wants liability protection with almost no extra tax admin
What it saves
No tax saving by itself, but it protects personal assets and makes expenses cleaner to defend
What it costs
State filing fee, often 50 to 500 a year
Break even
Worth it as soon as the business has customers or contracts

How it is set up

  1. Register the LLC in your state and get an EIN from the IRS.
  2. Open a separate business bank account.
  3. Keep reporting profit on Schedule C or a partnership return.

Watch out: An LLC alone does not reduce self-employment tax. Mixing personal and business money undoes the protection.

S-corporation election

Some admin
Best for
Profits above roughly 60,000 where you can pay yourself a reasonable salary
What it saves
15.3% self-employment tax on the distribution portion of profit
What it costs
Payroll service and a separate return, usually 1,200 to 3,000 a year
Break even
Usually worth it above about 60,000 of profit, rarely below 40,000

How it is set up

  1. Set a reasonable salary you can defend with market data.
  2. File Form 2553 within 75 days of the start of the tax year.
  3. Run real payroll and file Form 1120-S each year.

Watch out: An unreasonably low salary is the top S-corp audit issue and can undo the whole saving.

Holding company over operating entities

Serious admin
Best for
Owners with more than one business, or an operating business plus real estate
What it saves
Keeps property and cash out of the risky operating entity and can simplify a future sale
What it costs
Extra entity fees and returns for each layer
Break even
Worth considering with two or more real businesses, or a planned sale

How it is set up

  1. Map which assets belong in which entity before moving anything.
  2. Get advice on whether a consolidated group filing helps.
  3. Use written intercompany agreements for rent and services.

Watch out: Moving appreciated assets between entities can trigger tax. Get this modelled first.

Revocable and irrevocable trusts

Serious admin
Best for
Avoiding probate, controlling how heirs receive money, and removing growth from a large estate
What it saves
A revocable trust saves probate cost and delay, not tax. An irrevocable trust can remove assets and growth from the estate.
What it costs
1,500 to 10,000 to set up, plus trustee and filing costs for irrevocable trusts
Break even
Probate savings can justify a revocable trust at modest wealth; irrevocable trusts usually need seven figures

How it is set up

  1. Decide whether the goal is probate, control, or estate tax.
  2. Have an estate attorney in your state draft it.
  3. Actually retitle the assets into the trust, which is the step most people skip.

Watch out: Assets in an irrevocable trust may lose the step-up in basis at death, which can cost more in capital gains than it saves in estate tax.

1031 exchange on investment property

Some admin
Best for
Landlords selling one investment property to buy another
What it saves
Defers the whole capital gain and depreciation recapture instead of paying now
What it costs
Qualified intermediary fees, and tight deadlines
Break even
Almost always worth it if you are reinvesting the proceeds

How it is set up

  1. Engage a qualified intermediary before closing the sale, not after.
  2. Identify replacement property within 45 days.
  3. Close on it within 180 days.

Watch out: Touching the sale proceeds yourself, even briefly, breaks the exchange entirely.

Qualified small business stock on exit

Some admin
Best for
Founders and early shareholders in a C-corporation
What it saves
Potentially excludes a large share of the gain from federal tax
What it costs
Requires C-corp status and a holding period
Break even
Check eligibility years before a sale, not during it

How it is set up

  1. Confirm the company met the gross asset test when the stock was issued.
  2. Track your holding period and original issuance documents.
  3. Get the exclusion confirmed by a tax adviser before you sign a sale.

Watch out: Converting from an LLC, or buying shares from another holder, can break eligibility.