If you’re a freelance act or a one or two-person small business, choosing the correct corporate tax structure for your professional life is more than a minor formality.

The corporate tax structure you choose can impact how and at what rate you are taxed, the liability you face for business activities, your retirement savings choices, and whether or how you can bring partners or employees into the business.

Many small business people are evaluating how to structure their business activities in light of changes to the United States tax code presented in the new Tax Cuts and Jobs Act under President Donald Trump.

Roughly one-third of American workers are freelancers, earning their wages through an assemblage of clients whose business adds up to something resembling a salary, and this trend is expected to rise, with 43% earning a living as gig workers by 2020, according to Intuit data.

As workplace trends change and more people become solo-preneurs, it’s important for them to have a sense of their options for business structure.

“The changes implied by the new tax reform can be overwhelming,” says Rita Cheng, a financial advisor with Blue Ocean Global Wealth in Maryland.

“But there are reasons aside from taxes that my clients have changed their corporate tax structure. For instance, one freelancer I work with changed her business to an LLC so she would have liability protection and could also purchase a form of business insurance a major client requested she have before she could take a contact with them.”

Based on a business’s income level and future plans for growth, adjusting corporate tax structure can make sense—or can make very little difference, swapping the apples of one deduction for the oranges of another expense.

If you’re planning to discuss your corporate tax structure with an advisor or CPA, it’s important to know some basics about how the IRS views these business types.

Sole Proprietor

Many freelancers start out as sole proprietors. They may do side work while at a full-time job, eventually opting to transition to a fully freelance lifestyle, or they go solo and start with this corporate tax structure. When sole proprietors pay their taxes, they pay at an individual tax rate. Under new tax law, such workers can deduct 20% of revenue off taxable income—a good break.

However, the downsides to sole proprietorship are that this corporate tax structure doesn’t offer any inherent liability protection (although it could be purchased).

In addition, sole proprietors face a sort of “double taxation” in that self-employment taxes paid under this business structure include both the employee’s (that’s you) and employer’s (also you) portion of Social Security and Medicare. (As a full-time worker in your field, your employer would fund a portion of these expenses.)

Ms. Cheng says that where sole proprietors consider other structures, they often to move to an LLC for liability protection.

Some sole proprietors shift to an S Corporation, where they pay themselves a salary from the corporation at one tax rate and take additional income in the form of distributions (at another tax rate) from the business.

An approach that can lower some aspects of a tax bill, depending on income. The benefit of this switch may vary by income, and the freelancer or small business will need to plan diligently for annual (versus quarterly) tax payments.

Sole proprietors have a wide array of retirement savings choices, including SEP IRA and SIMPLE IRA plans, Roth IRA, and Single(k) plans.

These plans allow for the employee to set aside a large proportion of savings (up to 25%, or into the $50,000 range) from their income—but to really save a significant proportion or dollar amount of income, a worker would need to earn a high income.

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Partnership or LLC (one-person or more)

A partnership or LLC offers inherent liability protection—it’s a useful vehicle in businesses like real estate, where investors may wish to separate their owned property from their personal assets.

These business types also allow a business to provide its owner or principal with flow-through or “pass-through” income. Such businesses may be able to address deductions in a more advantageous way.

Another benefit of an LLC: You can have stakeholders at different participation levels—such as an executive or operating level, and a secondary non-voting level.

If you’re a solo entrepreneur running a one-person LLC, you’ll need to register with your state.

However, for tax purposes, your LLC is considered a “disregarded entity”—a structure of your own self-employment, more or less. Says the IRS: “An individual owner of a single-member LLC that operates a trade or business is subject to the tax on net earnings from self employment in the same manner as a sole proprietorship.”

If you plan to share your business with a spouse and live in a community property state, an LLC can have more than one member (you and a spouse) and still function as a disregarded entity.

This can afford your business liability protection, help a household operate a business jointly, and keep taxes simple.

S Corporation

For higher earners, an S Corp could make sense, notes Aaron Rubin, a planner with Werba Rubin Wealth Management in San Jose, California. By higher earners, he means those earning $250,000 or above.

The S Corp structure allows such a person to take W2 income at one tax rate, and distributions beyond that at another. Sole proprietors who transition to S Corps avoid the “double taxation” of self employment tax, he notes.

S Corps let those who run them draw income on a “pass-through” or “flow-through basis.” This means income goes into the business, and you draw it out indirectly—unlike in a sole proprietorship.

For retirement savings, you can use a SEP IRA, Roth IRA, Single(k).

However, the proportion of earnings you invest into these vehicles is based off the W2 wages you set for yourself—not the additional “distributions” you may also take from the business.

“There are future consequences to keeping your W2 income low,” Rubin notes.

For starters, W2 wages must resemble what others in the field make. A freelance writer with an S Corp might draw a $60,000 wage, but a lawyer or doctor drawing this wage might raise eyebrows with the IRS. Keeping W2 income low could impact Social Security and other later-life benefits, Rubin notes.

For those planning on potential business expansion, an S Corp has some important twists.

If you’re planning to take partners in the business, it’s important to note that partners in an S Corp may hold only one class of stock—so co-participants in the business cannot participate at different tiers.

Additionally, an S Corp can have no more than 100 partners. For a business operator considering a structure with unequal partners (general versus limited partners, voting versus non-voting partners), Rubin says, an LLC may make more sense.

C Corporation

Corporate flat tax rates have been reduced from 35% to 21% under the new tax plan, and corporations can deduct certain expenses at a lower rate if functioning as a C Corp. It’s a business structure that entrepreneurs with extensive real estate holdings might want to evaluate.

“There’s a mad rush into this business structure,” notes Ms. Cheng.

However, depending on income level, this may or may not make sense—and reporting and other business requirements may be more complex than warranted.

In the end, what it boils down to is this, Rubin says: “You have to do some mathematical testing to see what makes sense.”

The Freelancers Union produced this analysis of how a change in corporate structures may have little actual impact on a freelancer’s tax bill.

The example is dated and for a worker with what in an expensive urban market is a middle-class wage, but its details demonstrate how eliminating or lowering some items on a tax bill may be offset by other increases elsewhere on that bill due to a shift in business structure.

While workers in more middle and lower-middle class tax brackets may see some benefits from the new tax code.

This article outlines how Uber and Lyft drivers earning about $40,000 gain under new tax laws.

Those whose incomes are closer to or above six figures may have a serious debate on their hands as to which tax structure most benefits them. They’ll need to decide whether the hassles of a corporate change and new rules for filing taxes and managing documentation are worth it.

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Jane Hodges

Jane Hodges

Jane Hodges is the author of Rent Vs. Own (Chronicle Books) and has written about real estate and personal finance for The Wall Street Journal, New York Times, Seattle Times, Fortune and many other publications. Follow Jane on Twitter and Google+