US companies, holding companies and trusts

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.

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.

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.

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.

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.

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.