The One Big Beautiful Bill Act changed more than tax rates. It changed which business structures make the most sense, and when.
President Trump signed this law on July 4, 2025. Six months later, businesses that reorganized early are already saving money. The ones that waited? They're paying more than they need to.
Here's the bottom line: several tax breaks that were supposed to disappear at the end of 2025 are now permanent. Others got bigger. If you own a business, whether it's a small LLC, a growing startup, or an established company, the smartest way to organize may have changed.
This matters for your bottom line today and what you'll keep when you eventually sell.
The Big Choice: Should Your Business Be a Pass-Through or a Corporation?
Most small and mid-sized businesses are set up as "pass-through" entities. That includes:
- LLCs (Limited Liability Companies)
- S corporations
- Partnerships
- Sole proprietorships
These are called "pass-through" because the business itself doesn't pay income tax. Instead, the profits "pass through" to the owners, who report them on their personal tax returns.
The alternative is a C corporation, a separate legal entity that pays its own taxes. Big public companies are usually C corps. So are many venture-backed startups.
The new law made both options more attractive, but in different ways.
Pass-Through Businesses: The 20% Deduction Is Now Permanent
If you own a pass-through business, you can deduct 20% of your business income before calculating your taxes. This is called the Section 199A deduction.
What that means in plain English: If your business makes $200,000 in profit, you only pay taxes on $160,000. That's a significant savings.
This deduction was supposed to expire after 2025. Now it's permanent. The law also added a guaranteed minimum deduction of $400 for anyone with at least $1,000 in business income.
Who benefits most: Service businesses (consultants, accountants, doctors, lawyers) face some limitations on this deduction at higher income levels. But for most business owners, this is a reliable, ongoing tax break.
What to do: If you're running a pass-through and haven't reviewed your tax situation recently, now's the time. The permanent nature of this deduction affects long-term planning.
C Corporations: Much Better Deal When You Sell
Here's where founders and investors should pay attention.
If your company is a C corporation and qualifies as a "small business" under tax rules, you may be able to exclude a huge chunk of your profits from taxes when you sell your stock. This is called the QSBS exclusion (Qualified Small Business Stock).
The new law made this much more generous for stock purchased after July 4, 2025:
| What Changed | Old Rules | New Rules |
|---|---|---|
| Maximum tax-free gain | $10 million | $15 million |
| Company size limit | $50 million in assets | $75 million in assets |
| How long you must hold | 5 years minimum | 3 years for partial benefit |
The holding period change is huge. Before, you had to hold your stock for at least 5 years to get any tax break. Now:
- Hold for 3 years: 50% of your gain is tax-free
- Hold for 4 years: 75% of your gain is tax-free
- Hold for 5+ years: 100% of your gain is tax-free (up to $15 million)
What this means for you: If you're building a company you might sell in 3-5 years, being a C corporation might now be better than being a pass-through, even though pass-throughs have their own tax advantages along the way. The math depends on your expected exit value.
The key question: Would you rather save taxes every year (pass-through with the 20% deduction) or save a bigger amount when you sell (C corp with QSBS)? For many founders expecting a significant exit, QSBS just became much more attractive.
A Tax Workaround That Survived: The PTET Election
If you own a pass-through business in a high-tax state, there's a legal way to get around the federal limit on state tax deductions. It's called the Pass-Through Entity Tax (PTET) election.
Here's the background: Since 2018, individuals can only deduct $10,000 in state and local taxes on their federal returns (now temporarily raised to $40,000 through 2029, but only for some taxpayers). This hit people in high-tax states hard.
The PTET workaround: In 36 states, your business can elect to pay state income taxes at the company level instead of the owner level. When the business pays, there's no cap on the federal deduction.
Why this matters: Many people expected Congress to shut down this workaround. They didn't. The One Big Beautiful Bill Act left PTET completely intact.
States where PTET is available: California, New York, New Jersey, Maryland, Massachusetts, Connecticut, and about 30 others. Some state programs expire soon (Illinois at the end of 2025, Virginia in 2027), so check your state's rules.
Maryland and DC note: Maryland has PTET. DC does not. If you operate in both, this affects how you should structure things.
What to do: If you're in a high-tax state and haven't elected PTET, talk to your accountant. You may be overpaying.
Buy Equipment Now: 100% Write-Off Is Permanent
When your business buys equipment (computers, machinery, vehicles, furniture), you can now deduct the entire cost in the year you buy it. This is called 100% bonus depreciation, and the new law made it permanent.
Before: This benefit was being phased out. In 2024, you could only deduct 60%. By 2027, it would have been 0%.
Now: 100% deduction, forever (or until the law changes again).
What this means: If you spend $100,000 on equipment, you can deduct the full $100,000 this year instead of spreading it over 5-7 years. That's a big cash flow advantage.
Special Deal for Manufacturers: Buildings Too
Here's something most people don't know: if you build a manufacturing facility, you may be able to write off the entire building cost in one year.
Normally, commercial buildings must be depreciated over 39 years. The new law created a temporary exception for "qualified production property", basically buildings where you make physical products.
The catch: Construction must begin before January 1, 2029, and the building must be in use before January 1, 2031.
What this means: If you're planning to build or expand a factory, warehouse, or production facility, starting construction by the end of 2028 could save you millions in taxes.
R&D Costs: You Can Deduct Them Immediately Again
If your business spends money on research and development (testing new products, developing software, improving processes), you can now deduct those costs right away.
This is a return to how things worked before 2022. The old tax law (TCJA) had forced businesses to spread R&D deductions over 5 years. The new law eliminates that requirement.
Bonus for small businesses: If your company has less than $31 million in annual revenue, you can actually go back and amend your 2022-2024 tax returns to claim immediate deductions you weren't allowed to take before. The deadline is July 4, 2026.
What to do: If you've been capitalizing R&D expenses, review whether amended returns make sense. The refund could be substantial.
More Room to Deduct Interest
If your business has significant debt, the new law helps you deduct more of your interest payments.
The technical change: The IRS now lets businesses add back depreciation and amortization when calculating how much interest they can deduct. This effectively raises the cap on interest deductions.
In plain English: Before, businesses with lots of equipment and debt often couldn't deduct all their interest. Now, more of it is deductible.
Who benefits: Manufacturing companies, real estate businesses, private equity-backed companies, and any business with significant debt and depreciating assets.
Buying or Selling a Business? Structure Matters More Now
If you're involved in a business acquisition, as buyer or seller, the tax law changes affect how deals should be structured.
For buyers: Buying a company's assets (rather than its stock) just got much more attractive. With permanent 100% bonus depreciation, you can immediately write off the cost of equipment, machinery, and other assets you acquire. This improves your return on investment.
For sellers: Expect buyers to push harder for asset deals. If you're selling a company with lots of equipment or real estate, understand that asset sales may result in more of your gain being taxed as ordinary income (not the lower capital gains rate). Model both scenarios before negotiating.
The bottom line: Deal structure affects taxes significantly. According to the Tax Foundation, the combination of permanent bonus depreciation and more generous interest deductions makes asset acquisitions meaningfully cheaper for buyers.
If You Have Foreign Operations
For businesses with overseas subsidiaries or international sales, the new law made the rules permanent (and slightly less favorable):
- Tax on foreign earnings (formerly called GILTI): About 14% effective rate
- Benefit for export income (formerly called FDII): Also about 14% effective rate
- Minimum tax on payments to foreign affiliates (BEAT): Stays at 10.5%
The rates are a bit higher than before, but the permanence gives you certainty for planning.
Good news: A proposed "revenge tax" on foreign investors was dropped from the final bill after international negotiations.
What You Should Do Now
Here's a checklist your team can work through:
1. Review your business structure. Is a pass-through or C corporation better for your situation? The answer may have changed. Consider your expected exit timeline and value.
2. Check if you've elected PTET. If you're in a high-tax state with a pass-through business, this could save significant taxes. 36 states offer this option.
3. Accelerate equipment purchases. With permanent 100% deduction, buying equipment sooner improves cash flow.
4. If you're a manufacturer, plan construction timing. Starting before 2029 captures the building write-off. After that, it's back to 39-year depreciation.
5. Review R&D expenses from 2022-2024. Small businesses can amend returns and potentially get refunds. Deadline: July 4, 2026.
6. Model your debt capacity. The expanded interest deduction may allow more favorable financing.
7. Track when you acquired stock. QSBS rules differ based on whether you bought before or after July 4, 2025. This matters for exits and equity rollovers.
Watchlist
IRS guidance on manufacturing building eligibility (Q1 2026). Clarification coming on what facilities qualify for the 100% write-off.
State PTET expirations. Illinois ends this year; California runs through 2030; Virginia through 2027. Plan accordingly.
QSBS rules for family members. How the $15 million cap applies across related parties needs clarification.
The Bottom Line
The One Big Beautiful Bill Act didn't just extend tax breaks. It made them permanent and made some of them bigger.
The businesses that act now will save money. The ones that wait will miss opportunities that don't come back.
Your business structure matters more than ever. The law just made that clear.