The One Big Beautiful Bill Act (OBBBA), which was signed into law last year, represents one of the most significant tax law updates affecting entrepreneurs in years. While many provisions target large corporations, several changes create new opportunities for small business owners to reduce taxes, improve cash flow, and plan for future growth.
Below are five planning moves business owners may want to discuss with their financial advisors.
1. Re-Evaluate Your Entity Structure
The Internal Revenue Code Section 199A Qualified Business Income deduction — commonly known as the 20% pass-through deduction — is now permanent under OBBBA.This deduction applies to income from:
- S-corporations
- Partnerships
- LLCs taxed as partnerships
- Sole proprietorships
Because the deduction was previously scheduled to expire after 2025, many owners delayed structural decisions. Now that it is permanent, this may be a good time to review:
- S-corp vs LLC tax treatment
- Owner compensation strategies
- Profit distribution planning
For many businesses, optimizing the 20% deduction can meaningfully reduce lifetime tax liability.
2. Consider Whether Future Growth Favors a C-Corporation
OBBBA expanded the benefits associated with Internal Revenue Code Section 1202 Qualified Small Business Stock (QSBS). If your company is structured as a C-corporation, qualifying stock may allow shareholders to exclude a large portion of capital gains when the business is eventually sold. New rules provide:
- 50% gain exclusion after 3 years
- 75% exclusion after 4 years
- 100% exclusion after 5 years
The lifetime gain exclusion limit was also increased to $15 million. For founders building a high-growth company with an expected exit, the potential tax savings from QSBS could be substantial.
3. Accelerate Research and Development Spending
Recent tax law changes had required businesses to amortize research and development expenses over five years, which reduced the tax benefit of innovation spending. OBBBA restores the ability to deduct domestic R&D costs immediately. This is particularly valuable for companies investing in:
- software development
- engineering and product design
- manufacturing innovation
- technology development
Immediate deductions can improve after-tax cash flow, which may allow growing companies to reinvest more capital back into the business.
4. Revisit Your Financing Strategy
The law also adjusts the interest deduction limitation under Internal Revenue Code Section 163(j). The deduction calculation now again resembles EBITDA rather than EBIT, which generally increases the amount of interest businesses can deduct. This change may benefit businesses that rely heavily on financing, including:
- real estate companies
- capital-intensive businesses
- companies funding expansion with debt
If your business uses leverage, reviewing your capital structure may uncover opportunities to improve tax efficiency.
5. Take Advantage of Workforce-Related Tax Credits
OBBBA expands several employer tax incentives designed to support hiring and employee benefits. Examples include credits related to:
- workforce training and apprenticeships
- employer-provided childcare programs
- hiring employees from targeted groups through the Work Opportunity Tax Credit
These incentives can help offset the cost of recruiting and training workers; providing family-friendly employee benefits, and strengthening employee retention. For many small businesses facing a tight labor market, these credits can meaningfully reduce the cost of building a strong team.
For small business owners, the One Big Beautiful Bill Act creates several opportunities to improve tax efficiency and long-term planning. In summary, key areas worth reviewing include:
- business entity structure
- innovation and R&D spending
- financing strategy
- workforce incentives
- long-term exit planning
Because the impact varies widely depending on income, industry, and growth plans, coordinating with financial professionals can help ensure you are making the most of these new rules.