Accounting
S corporations bring tax advantages with caveats
Electing to establish an S corporation could unlock the tax benefits enjoyed by millions of small business owners — as long as financial advisors and clients avoid some pitfalls.
Those include the ramifications of filing for deductions on the pass-through entity’s so-called qualified business income, the requirement of one single class of stock for the company’s equity and the implications of the S corp holding real estate, according to Tal Binder, CEO of
The caveats of S corp classification
For advisors and their clients, the S corp entity classification — named after Subchapter S of the Internal Revenue Code as a “Subchapter S corporation” or a “Small Business Corporation” — represents an opportunity with some tradeoffs.
“Instead of thinking about it as just a tax structure, think about it as a tool — it’s a tool in the toolbox when you’re doing tax planning or tax strategy,” Binder said in an interview. “The S corp has a lot of tax benefits. It just becomes more complicated as you dig into the specifics and the numbers.”
Business owners and their advisors have likely run into those challenges in any number of situations — Binder noted that professional services firms such as a small wealth management company usually make the best candidates to be S corporations. The entity classifications of registered investment advisory firms
Most service-based businesses do elect to be S corporations, according to Miklos Ringbauer, the founder of Los Angeles-based tax firm
“You have to understand the state rules first — before you look at tax structure,” Ringbauer said in an interview. “Where we shine as tax professionals is providing that value, that guidance to the taxpayers, the investors to make the right choices, to help them to decide what is the best, optimized tax structure for their operation.”
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History to of S corporations
And tax pros have been doing so for decades.
Almost 70 years ago, small business owners gained the exemption from double taxation on corporate income flowing to their personal returns to
“How significant was the creation of subchapter S?” it asked. “Consider that in 1958, the top income tax rate was 52% for corporations and 91% for individuals. That means dividends paid by a C-corporation to a high-income shareholder faced an effective tax rate of 96% Even a shareholder with median family income faced an effective federal tax of more than 60%.”
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Potential downsides to S corp entities
The savings to the owners of S corporations add up in the right circumstances, but laws and individual tax implications could call for a sole proprietorship, partnership, limited liability company or a C corporation as a better fit.
In the case of a pass-through business tapping into the deduction
As another caveat to the S corporation, certain RIAs launch when advisors team up, but one of the advisors may bring a much more substantial base of clients to the business. That would suggest that one of the owners should have more control of the firm than the other, even if they each own half of the RIA, Binder said. They couldn’t set up the business that way as an S corporation that can only have one class of stock, though.
“It doesn’t make sense, because you started it and built it for many, many years,” he said. “That might disqualify the S corp, so it’s not best in those cases.”
He brought up the additional problematic use of the structure with the idea of an S corporation RIA holding the building housing the business in the same entity, which is “the right approach” from the perspective of the general tax savings for real estate assets but “in the vast majority of cases not beneficial to you,” Binder said. The real estate could bring higher payments to Uncle Sam for an S corporation, based on the rules for tax basis and mortgage financing.
An LLC or LLP structure also provides more flexibility than an S corporation for transferring the real estate asset out of the business and into the client’s personal holdings without generating a taxable event, Ringbauer noted. From the perspective of a startup company that must take out heavy loans for capital expenses while incurring business losses in the first few years after launch, the S corporation could further cap the level of deductions — far below the amount available to an LLC or LLP, he said.
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Don’t go it alone on business-entity decisions
Unfortunately, many business owners attempt to choose their entity based on a simple online search or even a question to a public chatbot, according to Ringbauer.
“There’s a lot of incorrect information out there, which would result in incorrect guidance on how to treat stuff,” he said. “It’s a personal preference, but if it is properly guided, then the individuals who are starting the business will be able to make the right choice.”
In that vein, advisors who might otherwise avoid any mention of tax-related topics that fall
“I’d highly recommend the wealth manager to partner with a competent tax professional or CPA firm,” he said.
Jody Padar, an author and speaker known as “The Radical CPA,” and Katie Tolin, a growth strategist for CPAs, together launched a training and technology platform called XcelLabs.
XcelLabs provides solutions to help accountants use artificial technology fluently and strategically. The Pennsylvania Institute of CPAs and CPA Crossings joined with Padar and Tolin as strategic partners and investors.
“To reinvent the profession, we must start by training the professional who can then transform their firms,” Padar said in a statement. “By equipping people with data and insights that help them see things differently, they can provide better advice to their clients and firm.”
The platform includes XcelLabs Academy, a series of educational online courses on the basics of AI, being a better advisor, leadership and practice management; Navi, a proprietary tool that uses AI to help accountants turn unstructured data like emails, phone calls and meetings into insights; and training and consulting services. These offerings are currently in beta testing.
“Accountants know they need to be more advisory, but not everyone can figure out how to do it,” Tolin said in a statement. “Couple that with the fact that AI will be doing a lot of the lower-level work accountants do today, and we need to create that next level advisor now. By showing accountants how to unlock patterns in their actions and turn client conversations into emotionally intelligent advice, we can create the accounting professional of the future.”
“AI is transforming how CPAs work, and XcelLabs is focused on helping the profession evolve with it,” PICPA CEO Jennifer Cryder said in a statement. “At PICPA, we’re proud to support a mission that aligns so closely with ours: empowering firms to use AI not just for efficiency, but to drive growth, value and long-term relevance.”
The accountant the world urgently needs has evolved far beyond the traditional role we recognized just a few years ago.
The transformation of the accounting profession is not merely an anticipated change; it is a pressing reality that is currently shaping business decisions, academic programs and the expected contributions of professionals. Yet, in many areas, accounting education stubbornly clings to outdated, overly technical models that fail to connect with the actual demands of the market. We must confront a critical question: If we continue to train accountants solely to file tax reports, are we truly equipping them for the challenges of today’s world?
This shift in mindset extends beyond individual countries or educational systems; it is a global movement. The recent announcement of the
The CIMA/CGMA proposal for 2026 is not just a curriculum update; it is a powerful manifesto. This new program positions analytical thinking, strategic business partnering and technology application at the core of accounting education. It unequivocally highlights sustainability, aligning with IFRS S1 and S2, and expands the accountant’s responsibilities beyond mere numbers to encompass conscious leadership, environmental impact and corporate governance.
The current changes in the accounting profession underscore an urgent shift in expectations from both educators and employers. Today, companies of all sizes and industries demand accountants who can do far more than interpret balance sheets. They expect professionals who grasp the deeper context behind the numbers, identify inconsistencies, anticipate potential issues before they escalate into losses, and act decisively as a bridge between data and decision making.
To meet these expectations, a radical mindset shift is essential. There are firms still operating on autopilot, mindlessly repeating tasks with minimal critical analysis. Likewise, many academic programs continue to treat accounting as purely a technical discipline, disregarding the vital elements of reflection, strategy and behavioral insight. This outdated approach creates a significant mismatch. While the world forges ahead, parts of the accounting profession remain stuck in the past.
The consequences of this shift are already becoming evident. The demand for compliance, transparency and sustainability now applies not only to large corporations but also to small and mid-sized businesses. Many of these organizations rely on professionals ill-equipped to drive the necessary changes, putting both business performance and the reputation of the profession at risk.
The positive news is that accountants who are ready to thrive in this new era do not necessarily need additional degrees. What they truly need is a commitment to awareness, a dedication to continuous learning, and the courage to step beyond their comfort zones. The future of accounting is here, and it is firmly rooted in analytical, strategic and human-oriented perspectives. The 2026 curriculum is a clear indication of the changes underway. Those who fail to think critically and holistically will be left behind.
In contrast, accountants who see the big picture, understand the ripple effects of their decisions, and actively contribute to the financial and ethical health of organizations will undeniably remain indispensable, anywhere in the world.
Congressional Republicans are siding with Donald Trump in the messy divorce between the president and Elon Musk, an optimistic sign for eventual passage of a tax cut bill at the root of the two billionaires’ public feud.
Lawmakers are largely taking their cues from Trump and sticking by the $3 trillion bill at the center of the White House’s economic agenda. Musk, the biggest political donor of the 2024 cycle, has threatened to help primary anyone who votes for the legislation, but lawmakers are betting that staying in the president’s good graces is the safer path to political survival.
“The tax bill is not in jeopardy. We are going to deliver on that,” House Speaker Mike Johnson told reporters on Friday.
“I’ll tell you what — do not doubt, don’t second guess and do not challenge the President of the United States Donald Trump,” he added. “He is the leader of the party. He’s the most consequential political figure of our time.”
A fight between Trump and Musk exploded into public view this week. The sparring started with the tech titan calling the president’s tax bill a “disgusting abomination,” but quickly escalated to more personal attacks and Trump threatening to cancel all federal contracts and subsidies to Musk’s companies, such as Tesla Inc. and SpaceX which have benefitted from government ties.
Republicans on Capitol Hill, who had — until recently — publicly embraced Musk, said they weren’t swayed by the billionaire’s criticism that the bill cost too much. Lawmakers have refuted official estimates of the package, saying that the tax cuts for households, small businesses and politically important groups — including hospitality and hourly workers — will generate enough economic growth to offset the price tag.
“I don’t tell my friend Elon, I don’t argue with him about how to build rockets, and I wish he wouldn’t argue with me about how to craft legislation and pass it,” Johnson told CNBC earlier Friday.
House Budget Committee Chair Jodey Arrington told reporters that House lawmakers are focused on working with the Senate as it revises the bill to make sure the legislation has the political support in both chambers to make it to Trump’s desk for his signature.
“We move past the drama and we get the substance of what is needed to make the modest improvements that can be made,” he said.
House fiscal hawks said that they hadn’t changed their prior positions on the legislation based on Musk’s statements. They also said they agree with GOP leaders that there will be other chances to make further spending cuts outside the tax bill.
Representative Tom McClintock, a fiscal conservative, said “the bill will pass because it has to pass,” adding that both Musk and Trump needed to calm down. “They both need to take a nap,” he said.
Even some of the House bill’s most vociferous critics appeared resigned to its passage. Kentucky Representative Thomas Massie, who voted against the House version, predicted that despite Musk’s objections, the Senate will make only small changes.
“The speaker is right about one thing. This barely passed the House. If they muck with it too much in the Senate, it may not pass the House again,” he said.
Trump is pressuring lawmakers to move at breakneck speed to pass the tax-cut bill, demanding they vote on the bill before the July 4 holiday. The president has been quick to blast critics of the bill — including calling Senator Rand Paul
As the legislation worked its way through the House last month, Trump took to social media to criticize holdouts and invited undecided members to the White House to compel them to support the package. It passed by one vote.
Senate Majority Leader John Thune — who is planning to unveil his chamber’s version of the bill as soon as next week — said his timeline is unmoved by Musk.
“We are already pretty far down the trail,” he said.
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