It is April 27, 2026. Choosing between an LLC taxed as a C-Corp or an S-Corp has become a “Battle of the Patent Box.” As mentioned in Article #557, the 10% tax rate on IP income is tempting, but it’s not for everyone.
1. The S-Corp “Pass-Through” Advantage
- The Scenario: If your LLC is an S-Corp, you can combine the Section 199A deduction (Article #567) with AI-driven royalties.
- The Limit: However, the “Patent Box” (10% rate) is often restricted to C-Corporations.
- The Shark Insight: “The math is simple: If you plan to reinvest 100% of your profit into more hardware, the C-Corp + Patent Box is unbeatable. If you want to pull cash out for personal use, the S-Corp + 199A is still your best friend. Don’t let a ‘cool’ new tax law dictate a bad distribution strategy.”