How Your Entity Structure Might Be Costing You—Quietly, Every Single Year.

Most business owners pick an entity structure once, LLC, S-Corp, partnership, C-Corp, and then never touch it again.

That’s understandable. You’re busy running the business.

But here’s the problem:

The “right” structure at $150K of profit can be the wrong structure at $600K.
And the cost of being wrong doesn’t show up as a dramatic mistake. It shows up as a quiet leak.

The quiet leak

If your structure is outdated, you might be overpaying through:

• unnecessary self-employment taxes or payroll taxes

• inefficient owner compensation

• missed credits, deductions or limited strategy options

• a messy setup that will hurt you during a sale or succession plan

And because your return is filed accurately, it’s easy to assume you’re fine.

Accurate filing is not the same as optimized strategy.

The most common reason this gets missed

Most tax relationships are built around compliance:

• “Get me filed.”

• “Keep me out of trouble.”

• “Tell me what I owe.”

• "It is what it is."

That’s important. But it doesn’t automatically include proactive optimization, especially as your business grows.

Signs your entity structure may be outdated

If any of these are true, it’s worth reviewing:

• Your profit has grown materially over the past 2–3 years

• You're still paying yourself the same way you always have

• You added a partner or changed ownership

• You expanded into another state

• You started thinking about selling in the next 2–5 years

• You’ve never had a strategy conversation about why your current structure is best

“But I’m an LLC—doesn’t that cover it?”

An LLC is often a legal structure first, and a tax treatment second.

Many owners assume “LLC” is the plan. It isn’t.

What matters is how you’re taxed and how the money moves:

• how income is reported

• how the owner is paid

• how payroll vs distributions are handled (where relevant)

• how benefits and retirement options fit in

• how future growth or sale would be taxed

Why this matters more as you grow

When you’re smaller, “good enough” might truly be good enough.

As you grow, small inefficiencies become expensive because they apply to a bigger number.

It’s like a pricing problem:

• A 2% leak at $200K is annoying

• A 2% leak at $1M is a vacation, a vehicle, or a hire

What an entity review should actually do

A real review isn’t “Should I be an S-Corp?” as a standalone question.

It’s: Does my entity + compensation + tax strategy match my goals?

A solid review usually looks at:

• current profit level and forecast

• how you’re paying yourself (and why)

• the business’s next 12–24 months (growth, hires, location changes)

• risk tolerance and audit exposure

• future exit plans (sell, pass to family, internal succession)

Bottom line

If your entity structure hasn’t been evaluated since you set it up, there’s a decent chance you’re paying a “lazy tax.”

Not because you did anything wrong, because your business changed and the structure didn’t.

The best time to review this is before year-end, before comp decisions lock, and before big purchases happen.

If you want a second set of eyes, we offer a no-cost, no-obligation Tax Strategy Review to pressure-test whether your structure still fits the business you’re running today.