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    Dimension 02

    Entity Structure

    Choose the right business structure

    The Entity Structure dimension analyzes your business structure options across tax efficiency, compliance burden, and audit risk. It compares Sole Proprietorship, LLC, and S-Corp elections — calculating FICA savings, QBI deduction impacts, and reasonable salary requirements. This dimension also establishes ethical boundaries, flagging strategies that cross legal lines and ensuring all modeled outcomes can withstand IRS scrutiny.

    Key Capabilities

    S-Corp vs. LLC comparative analysis
    FICA savings calculation with break-even analysis
    QBI deduction modeling (§199A)
    Reasonable salary determination
    Entity election timing analysis
    Audit risk scoring and alerts
    Accuracy-related penalty warnings
    Circular 230 ethical standards compliance

    Real-World Examples

    1Scenario

    Self-employed consultant earning $180K considering S-Corp election

    PRISM Output:

    Analysis shows $12,400 annual FICA savings after reasonable salary requirements, with break-even at $85K net income

    2Scenario

    S-Corp owner paying themselves $20,000 salary on $200,000 profit

    PRISM Output:

    Warns of unreasonably low compensation, cites IRS reasonable salary guidelines and Watson v. Commissioner, models minimum $65,000 salary based on industry benchmarks

    IRS References

    Form 2553

    Election by a Small Business Corporation

    Schedule SE

    Self-Employment Tax

    Form 8995

    Qualified Business Income Deduction

    Publication 535

    Business Expenses

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