Hi there,

Happy New Year! As we step into 2025, it’s time to set the tone for an incredible year of growth and success. Whether you’re expanding your business, launching new ventures, or fine-tuning your strategy, smart planning is the key to hitting your goals.

In this week’s edition of The Profit Pilot, we’re diving into:

• How to structure joint ventures to avoid double taxation.

• Real-life examples of how we’ve helped clients like you build for growth.

The Tax Efficiency of S Corporations in Joint Ventures

When S corporation owners collaborate through a joint venture, the risk of double taxation is minimal if the new entity is structured properly. Here’s what you need to know:

Key Considerations:

• Entity Structure: Setting up the joint venture as an LLC with an S corporation election ensures pass-through taxation, so income is taxed only at the individual level.

• Ownership Restrictions: S corporations must be owned by individuals, not other corporations. This can influence how the joint venture is structured.

• Managing Multiple S Corporations: Operating multiple S corporations doesn’t inherently lead to double taxation, but it increases administrative complexity. Careful coordination of operations and filings is essential.

Recommendations:

1. Consult a Tax Professional: Every situation is unique. Work with a tax advisor to tailor the joint venture’s structure to your specific needs.

2. Explore Alternative Structures: Depending on your goals, partnerships or LLCs taxed as partnerships might provide more flexibility in ownership and profit-sharing while maintaining pass-through taxation.

Real-Life Scenarios: Helping Clients Build for Growth

We’ve worked with many clients to structure new ventures and expansions in a tax-efficient way. Here are a couple of examples:

• Expanding a Physical Location: One client in the healthcare sector wanted to open a new practice location. By creating a new LLC taxed as an S corporation, we helped them streamline operations, maintain pass-through taxation, and minimize self-employment tax liabilities.

• Joint Ventures Between Businesses: Two of our clients, each owning multiple S corporations, collaborated on a new venture to provide shared services. By structuring the joint venture as a partnership, we ensured compliance with ownership restrictions while offering flexibility in profit-sharing.

Let’s Plan for Your Next Move

Whether you’re setting up a new location or exploring a joint venture, the right structure can make all the difference. Need guidance on how to make it happen? Let’s chat—reply to this email or schedule a consultation.

Here’s to making smart moves that drive your growth,

Doyin Ogunbajo, CPA
ASO Financial