How to Set Up Your Business to Get the Most From the New Tax Law

The One Big Beautiful Bill Act didn’t just tweak the tax code. It rewrote the playbook for how businesses should structure, invest, and plan exits.

Six months since President Trump signed the OBBBA into law on July 4, 2025, the strategic implications are coming into focus. The businesses that moved quickly on entity restructuring, capital investment timing, and R&D planning are already seeing the benefits. The ones that didn’t? They’re leaving money on the table.

Here’s the reality: the OBBBA made permanent a series of provisions that were scheduled to expire at the end of 2025 - and enhanced several others. Whether you’re running a pass-through entity, considering a C-corp conversion, planning an exit, or evaluating an acquisition, the optimal structure may have shifted under your feet.

This isn’t abstract tax policy. It’s a decision framework that affects your cash flow today and your exit multiple tomorrow.

The Structural Choices: Pass-Through vs. C-Corp

The Pass-Through Advantage Got Stronger

The Section 199A qualified business income deduction is now permanent. That means pass-through entities - S corporations, partnerships, and sole proprietorships - can deduct 20% of their qualified business income. It was set to sunset after 2025. Now it doesn’t.

But here’s what matters operationally: the law also added a new $400 minimum deduction for taxpayers with at least $1,000 of active qualified business income. And while the income phase-out thresholds for high earners weren’t dramatically altered, the permanence itself changes planning - you’re no longer racing a sunset.

If you’re operating a professional services firm - law, accounting, consulting, financial services - this matters. The “specified service trade or business” limitations still apply, but now you can plan around them indefinitely rather than treating them as temporary constraints.

Our read: If you’re currently operating as a pass-through and weren’t maximizing the QBI deduction, revisit your 2025 return projections with your tax advisor. The permanent status alone may change how you think about entity selection.

The C-Corp Case Just Got Better for Exits

The flip side: the OBBBA dramatically enhanced the qualified small business stock (QSBS) exclusion under Section 1202. For founders and early investors in C corporations, this is potentially the biggest shift in the law.

The changes for stock acquired after July 4, 2025:

• Per-issuer exclusion cap: Increased from $10 million to $15 million (indexed for inflation starting 2027)
• Gross asset threshold: Raised from $50 million to $75 million
• Holding period: Now tiered - 50% exclusion at 3 years, 75% at 4 years, 100% at 5 years

That last change is significant. Previously, you needed to hold QSBS for a minimum of five years to get any exclusion. Now you can get partial benefits with a three-year hold. For founders who need liquidity before the five-year mark - or who are structuring staged exits - this creates optionality that didn’t exist before.

The strategic question: If you’re currently a pass-through but planning an exit in 3-5 years, does it make sense to convert to a C-corp now and qualify for QSBS treatment?

The answer depends on your timeline, your projected gains, and whether you can meet the “active business” and other QSBS requirements. But the calculus has shifted. A $15 million federal tax-free gain exclusion - up from $10 million - is worth modeling against the QBI deduction you’d give up.

The PTET Workaround Survived

One provision that didn’t change: the pass-through entity tax (PTET) election remains fully available.

There was real concern during the legislative process that Congress would eliminate or limit the PTET workaround. The mechanism lets pass-through entities in 36 states pay state income taxes at the entity level and deduct those taxes as business expenses - effectively bypassing the $10,000 SALT cap (now $40,000 through 2029) for owners.

The final OBBBA preserved PTET entirely. No limitations. No carve-outs for specified service businesses, despite earlier proposals.

What this means operationally: If you’re in a high-tax state (California, New York, New Jersey, Maryland, Massachusetts) and haven’t elected PTET treatment, you’re likely overpaying federal taxes. The election is available in 36 states, though some have expiration dates - California’s PTET runs through 2030, Illinois expires at the end of this year.

Maryland and DC note: Maryland offers PTET; DC does not. If you’re operating in both jurisdictions, your entity allocation becomes more important.

Capital Investment Timing: The 100% Depreciation Window

The OBBBA permanently restored 100% bonus depreciation for qualified property acquired after January 19, 2025. This reverses the phase-down that was scheduled under the TCJA - bonus depreciation had dropped to 60% in 2024 and was headed to zero by 2027.

But here’s the provision creating urgency for manufacturers: the qualified production property (QPP) expensing allows 100% immediate deduction for newly constructed manufacturing buildings if:

• Construction begins after January 19, 2025 and before January 1, 2029
• The property is placed in service before January 1, 2031

This is a limited window. If you’re planning to build manufacturing capacity in the US, the tax benefit of beginning construction before January 1, 2029 is substantial - you can write off the full cost of the building in the year it’s placed in service, rather than depreciating over 39 years.

The practical implication: Capital planning cycles for manufacturing investments should be compressed. If you have a factory expansion or new production facility on your five-year roadmap, accelerating to begin construction by December 2028 captures the full benefit. Waiting until 2029 means standard 39-year depreciation.

R&D Expenses: Immediate Deduction Restored

The five-year amortization requirement for domestic R&D expenses - one of the most criticized provisions of the TCJA - is effectively repealed. Under the OBBBA, domestic research and experimental costs are immediately deductible for tax years beginning after December 31, 2024.

What’s more, small businesses with average annual gross receipts of $31 million or less can elect to amend their 2022-2024 returns to accelerate previously capitalized R&D deductions. The deadline for that election is July 4, 2026.

Action item: If you’re a qualifying small business and capitalized R&D expenses in 2022-2024, model the refund opportunity. The amendment window is open, and the cash impact could be material.

Interest Deduction Expansion: Leverage Got Cheaper

The OBBBA permanently restores the more favorable EBITDA-based calculation for the Section 163(j) business interest limitation. Under the TCJA’s post-2021 rules, the 30% ATI limitation was calculated without adding back depreciation and amortization - effectively making the limitation bite harder on capital-intensive businesses.

Now, with the EBITDA addback restored, businesses can deduct more interest expense. This directly affects:

• Leveraged acquisitions: M&A deals financed with debt have more room to deduct interest
• Capital-intensive operations: Manufacturing, infrastructure, and real estate businesses with significant depreciation get relief
• Private equity portfolio companies: Sponsor-backed companies with high leverage ratios see expanded deduction capacity

One important caveat: the OBBBA also closed a workaround. Capitalized interest is now generally subject to the 163(j) limitation, eliminating a planning strategy that some taxpayers used to defer the limitation.

M&A Structuring: Asset Deals Become More Attractive

The combination of permanent 100% bonus depreciation and expanded interest deductions shifts the M&A calculus toward asset purchases.

When a buyer acquires assets (rather than stock), they get a stepped-up basis in the acquired assets and can immediately deduct the full cost of depreciable property. With 100% bonus depreciation now permanent, asset deals become significantly more attractive to buyers - which affects deal negotiation and pricing.

For sellers: Expect buyers to push harder for asset deal structures. If you’re selling a business with significant tangible assets, model the tax difference between stock and asset treatment carefully. Asset deals typically result in ordinary income treatment on depreciation recapture, which may offset the premium a buyer is willing to pay for the stepped-up basis.

For buyers: The after-tax cost of acquisitions just dropped for asset deals. Factor permanent 100% bonus depreciation into your modeling - it changes IRR calculations meaningfully.

International Considerations

For businesses with foreign operations, the OBBBA made permanent (and modified) the GILTI and FDII regimes:

• GILTI (now “net CFC tested income”): Effective tax rate approximately 14% on foreign earnings
• FDII (now “foreign-derived deduction eligible income”): Also approximately 14% on domestic income from foreign sales
• BEAT: Locked at 10.5% permanently

The effective rate is slightly higher than prior law (GILTI was previously around 10.5% for C-corps), but the permanence provides planning certainty. If you’re structuring foreign operations or evaluating where to locate IP, the relative US tax burden on foreign earnings is now a known quantity.

One notable exclusion: the proposed Section 899 “revenge tax” on income from non-US persons in certain jurisdictions was dropped from the final bill following G7 negotiations. International investors in US businesses breathed a collective sigh of relief.

Practical Takeaways

Your finance and legal teams can action these items now:

1. Review entity structure against the permanent QBI deduction and enhanced QSBS rules - If you’re a pass-through contemplating exit in 3-5 years, model the C-corp conversion math. The $15 million QSBS exclusion may outweigh the QBI deduction depending on your projected exit value.

2. Elect PTET in your state if you haven’t - In 36 states, this remains an unlimited deduction at the entity level. The new $40,000 SALT cap doesn’t change the PTET calculus for high earners.

3. Accelerate domestic manufacturing construction timelines - If you’re planning production facilities, beginning construction before January 1, 2029 captures 100% immediate expensing. Waiting means 39-year depreciation.

4. Audit 2022-2024 R&D expenses for amendment opportunity - Small businesses ($31M or less in gross receipts) have until July 4, 2026 to amend returns and accelerate previously capitalized R&D deductions.

5. Re-model capital structure with EBITDA-based interest limits - The restored calculation method expands debt capacity for leveraged businesses. If you were at the 163(j) ceiling, run new numbers.

6. Brief your M&A team on asset deal advantages - Permanent 100% bonus depreciation changes buyer preferences. Sellers should anticipate structure negotiation; buyers should update acquisition models.

7. Track QSBS acquisition dates carefully - Stock acquired before July 4, 2025 has different rules ($10M cap, 5-year minimum). Stock acquired after gets the enhanced benefits. If you’re rolling equity in a transaction, the acquisition date matters.

Watchlist

• IRS guidance on QPP eligibility (expected Q1 2026): The “qualified production property” definition needs clarification for mixed-use facilities and certain building components.

• State PTET expirations: Illinois PTET expires January 1, 2026; California extends through 2030; Virginia through January 1, 2027. Plan entity elections accordingly.

• QSBS aggregation rules: IRS interpretation of how the $15 million cap applies across related persons and family attribution remains an open question.

• 163(j) guidance on interest capitalization: The closure of the capitalization workaround needs implementing guidance.

The Window is Open

The OBBBA didn’t just extend tax benefits - it enhanced them and made them permanent. That permanence changes how businesses should think about structure.

The entities that optimize now - entity selection, PTET elections, capital investment timing, R&D documentation, exit planning - will capture benefits that compound over years. The ones that defer these decisions are leaving money on the table every quarter they wait.

Your structure matters. The law just told you how much.