Security Dealer & Integrator

JUN 2018

Find news and information for the executive corporate security director, CSO, facility manager and assets protection manager on issues of policy, products, incidents, risk management, threat assessments and preparedness.

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40 Security Dealer & Integrator / www.SecurityInfoWatch.com June 2018 © Istock Pass-Through Business Benefits e income from a security business that has elected or chosen to be treated as a pass-through entity is taxed only once, on the owner's personal tax return – as opposed to a regular "C corporation," which has its profits taxed at the corporate level and again at the tax rates of dividend recipients. Security dealer and integrator own- ers operating as pass-through entity benefit from the legal advantages of regular corporations, along with the tax advantages of a sole proprietorship. Of course, the most attractive feature of pass-through businesses in the past was the tax savings. While "members" of an LLC are subject to employment tax on the entire net income of the business, only the wages of S corporation share- holders who are employees are subject to employment tax. e remaining income is paid to the owner as a "distribution" – which was taxed at a lower personal tax rate, if at all. An S corporation designation allows a business to have an independent life, separate from its shareholders. If a share- holder leaves the business, or sells his or her shares, the S corporation can con- tinue doing business relatively undis- turbed. Similar rules now also apply to partnerships. Maintaining the business as a distinct, separate entity defines clear lines between the shareholders and the business that significantly improve shareholders' protection from liability. Pass-Through Businesses at a Crossroads The drastic impact of new tax laws has owners of S corporations, LLCs and partnerships reassessing their choice of classification By Mark E. Battersby C onfusion is the name of the game aer lawmakers attempted to level the playing field between the new 21-percent tax rate for incorporated security businesses and the tax bill for income passed through to the own- ers of entities such as S corporations, Limited Liability Companies (LLCs) and partnerships. Despite creating a unique 20-per- cent deduction for pass-through income, last December's Tax Cuts and Jobs Act (TCJA) has many security dealer and integrator business owners facing personal tax rates as high as 29.6 percent – far above the new 21-percent rate for regular corporations. The Money Issue TAXES

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