Reviews
Part of Entity Tax Treatment: Defaults, Elections, and When to Revisit
Which entity tax treatment services are worth paying for
Entity tax treatment services: who sells them, how the savings pitch works, what an honest adviser refuses, and how to check a license before you sign.
What to take away
Entity tax treatment services often come from the person selling the structure. A formation service earns from the filing. A tax strategy seller earns from the plan. This guide marks which of those services are worth paying for and which are not.
Before you take advice on how your business should be taxed, identify who gives it. Ask what they earn from your answer.
- Split entity tax treatment services into two rolesforming the entity, and advising on its tax treatment. One person can hold both; know which hat they are wearing when they speak.
- A recommendation made without your numbers is a sales pitch.
- Advice is only as good as its follow-throughan election filed, acknowledged, and honored every year.
- The conditions are the IRS's, the state's are separate, and a CPA, enrolled agent or attorney decides for your facts. Nothing here is a recommendation.
Named entity tax treatment services worth paying for
These named services handle entity tax treatment work. Each entry lists what it does, who it suits, and a typical cost or limit. Check current pricing and licensing before you sign.
Three tests decided what is listed. The provider must be licensed or supervised where the work needs a license, or be labeled plainly as software or a retail filing service. Its price, or the basis for quoting it, must be public. And the return must carry a named preparer or firm.
| Named service | What it does | Who it suits | Typical cost or limit |
|---|---|---|---|
| Collective | Handles S-corp election support, payroll, bookkeeping, and federal and state tax filing for self-employed owners and single-member LLCs | Freelancers and solo owners who want the S-corp path handled in one subscription | Plans typically start near $200 per month; final quote follows a consultation |
| 1-800Accountant | Prepares S-corp, partnership, and C-corp returns and offers year-round advisory through a dedicated accountant | Small businesses that want an annual tax service instead of hourly CPA billing | Packages commonly run from about $600 to $2,000 per year, depending on forms and states |
| Withum | Provides entity tax planning and compliance for S corporations, partnerships, and C corporations, including multi-state issues | Companies with multiple owners, states, or complex allocations | Bills hourly or by project; partner and director rates typically run $300 to $600 per hour |
| RSM US LLP | Advises on entity classification, partnership agreements, and S-corp elections, then prepares the returns | Middle-market companies with cross-border or multi-tier ownership | Fees are scoped by project; no public flat rate |
| Aprio | Offers business tax services for S-corps, partnerships, and C-corps, with specialties in technology and professional services | Growth-stage and owner-managed businesses | Hourly or fixed-fee engagements; pricing quoted after a scope call |
| Baker Tilly | Provides entity structuring, state and local tax, and federal compliance for private and middle-market companies | Businesses facing multi-state tax or private equity ownership | Engagement fees quoted after scope; partner rates often $400 to $800 per hour |
| H&R Block | Files S-corp, partnership, and C-corp returns at retail offices and online | Simple entity returns with one state and few allocations | S-corp returns commonly start around $800; state returns cost extra |
| TurboTax Business | Software for preparing Form 1120S, 1065, and 1120 | Owners who already know their classification and want to file themselves | Federal download often costs about $130; state is an extra purchase |
Verdicts on each entry:
- Collectiveworth it for a one-owner LLC or S-corp in one state with steady payroll. Not worth it once a second state or a second owner appears.
- 1-800Accountantworth it if you want one annual package and no hourly billing. Not worth it if your facts change during the year.
- Withum, RSM US LLP, Aprio and Baker Tillyworth it when owners disagree, when more than one state taxes the profit, or when the return needs an allocation schedule. Not worth it for a one-state owner-managed return with no allocations.
- H&R Blockworth it for a simple entity return that needs a preparer's signature. Not worth it if you need advice on the classification itself.
- TurboTax Businessworth it if you know your classification and want to file yourself. Not worth it if the return depends on an election you have not made.
On price, a $200 a month subscription runs about $2,400 a year. That is four hours of partner time at $600 an hour, or eight at $300. Count your own billed hours against that line.
A routine one-owner entity in one state tends to sit under it. Once allocation questions or a second state enter, the subscription may not cover them and the hourly firm becomes the better value.
Who is in the market
| Provider | What they sell | What they earn from | What they will not do |
|---|---|---|---|
| Online formation service | Filing the state paperwork, a registered agent address | Per-filing fees and renewals | Advise on tax treatment. They file the boxes you tick |
| "Entity optimization" or "tax strategy" seller | A plan, usually with a promised saving | The plan fee, sometimes a share of the "saving" | Sign your return or be held to the number |
| Attorney | Entity choice for liability and ownership; the operating agreement | Time | Usually, the return itself |
| CPA or enrolled agent | Classification advice against your figures; the election; the return | Time or a flat fee | Form the entity, in most cases |
| Payroll provider | The payroll some classifications require | Subscriptions | Decide whether you need it |
Look at the gaps in the right-hand column. The seller of a structure will not be there when it is tested.
Who Does What
Provider
- Online formation
- State filing, agent
- Tax strategy seller
- A plan, saving
- Attorney
- Entity choice
- CPA or EA
- Classification, return
- Payroll provider
- Payroll services
Sells
- Online formation
- Filing fees
- Tax strategy seller
- Plan fee
- Attorney
- Time
- CPA or EA
- Time or flat
- Payroll provider
- Subscriptions
Earns From
- Online formation
- Tax advice
- Tax strategy seller
- Sign return
- Attorney
- The return
- CPA or EA
- Form entity
- Payroll provider
- Decide need
Won't Do
- Online formation
- Tax strategy seller
- Attorney
- CPA or EA
- Payroll provider
The savings pitch, taken apart
The pitch compares two classifications on an invented profit, shows a difference, and calls the difference a saving. What it leaves out is the cost of payroll the new classification may require. It also leaves out the administration, the state tax that may not follow the federal choice, the year-one setup, and the cost of getting out. Ask for:
Costs the Pitch Leaves Out
- Payroll the new classification may require
- Administration and ongoing obligations
- State tax that may not follow federal
- Year-one setup costs
- Cost of getting out
- Both columns with every cost in, not only the tax line.
- The break-even in your own numbers, from your own returns.
- What happens in a bad year, when profit falls below whatever made the plan work.
- What undoing it costs, and how long you would be locked in.
Nobody may promise a figure. A saving is known when the return is filed, not when the plan is sold. The federal business tax overview explains why the same profit is taxed differently under different classifications. That difference is what the pitch trades on.
Who signs what
The election is generally signed by an owner. The return is signed by an owner and by the paid preparer. The service that recommended the structure often signs nothing.
Ask each provider one question: what will your name be on? If the answer is "nothing", their advice carries no accountability. Weigh it accordingly.
Who Signs What
- Owner signs the election
- Owner signs the return
- Paid preparer signs the return
- Recommending service signs nothing
What a good adviser refuses
- To recommend a classification before seeing your numberstwo years of returns for an existing business, or a written forecast for a new one.
- To promise a saving.
- To file an election with an effective date that is not true.
- To ignore the state. The state business tax consequences of a federal election are part of the advice or the advice is incomplete.
- To set it and forget it. A classification carries ongoing obligations, and the adviser tells you what they are before you elect.
- To let you form an entity in another state because it is cheaper there, without explaining that you will still register and pay at home.
The interview
- What do I earn from the recommendation you are about to make? Ask it plainly.
- What would make you recommend the opposite?
- Which obligations start on the day the election takes effect?
- Who files the election, who confirms it was accepted, and where does the acknowledgment go?
- Who runs the payroll if payroll is required, and who confirms it is running? The payroll tax overview explains what that involves.
- What does it cost to reverse this in three years?
The Small Business Administration's page on choosing a business structure is a neutral starting point that sells nothing. Read it before any meeting. It teaches the vocabulary the seller is using.
Interview Questions to Ask
- What do I earn from this recommendation?
- What would make you recommend the opposite?
- Which obligations start on election day?
- Who files and confirms the election?
- Who runs and confirms payroll?
- What does reversing this cost in three years?
Where to check
| Source | Use it for |
|---|---|
| IRS business structures pages for your year | What the classifications are and what electing one requires |
| Your state's business filing office | What forming the entity involves at the state level |
| Your state's department of revenue | Whether the state follows the federal classification |
| The state board of accountancy or bar | Whether the adviser is licensed and in good standing |
The classifications themselves are laid out by the IRS, one page per structure, on its business structures pages. Read them first. An adviser who cannot talk you through that material without a slide deck is selling something else.
The entity tax treatment overview describes the classifications the adviser is choosing between.
Common questions
Is a formation service a bad idea?
No. It is a filing service. The problem starts when its checkout page is treated as tax advice.
The plan says it will save me a specific amount. Is that a lie?
It is a projection built on assumptions you have not seen. Ask for the assumptions. If they will not show them, the number is marketing.
Should the same person form the entity and prepare the return?
It can work well, because then one person is accountable for the whole chain. Ask them to say so in writing.
How do I know the election was actually accepted?
By the IRS acknowledgment, which someone must chase and file. If nobody can produce it, treat the election as unconfirmed until a professional has checked.
