When it comes to entrepreneurship, one of the most overlooked, yet critical, areas is understanding how taxes and business structures work together to either support or sabotage your financial growth. Jack Cohen, one of the most seasoned CPAs in the U.S., shared powerful insights into how to structure your business, protect your assets, and most importantly, keep more of what you earn.

Jack Cohen isn’t your average CPA. With 33 years of experience working inside the IRS, he brings a unique perspective to the table. He’s not just someone who knows the rules, he helped enforce them. And now, from the “other side of the fence,” Jack is using that wealth of experience to help entrepreneurs build smarter, more tax-efficient businesses.

In this post, we’ll unpack some of the key takeaways from Jack’s session so you can start optimizing your business finances today.

Many entrepreneurs start off as sole proprietors simply because it’s the easiest and fastest way to get started. But as Jack explains, what works for getting your business off the ground isn’t necessarily what will help it scale, or protect it in the long run.

Your business structure impacts:

• How much you pay in taxes

• Your liability and asset protection

• How you can pay yourself

• Your ability to bring on partners or investors

• How you transition or sell the business

Jack walked the audience through the most common business structures, Sole Proprietorship, LLC, S-Corp, C-Corp, and outlined how each affects your tax responsibilities and legal exposure.

If you’re running your business under your own name and have never registered a legal entity, you’re likely operating as a sole proprietor. While this might work temporarily, it comes with major downsides:

• No legal separation: Your personal assets (car, house, savings) are at risk if you’re ever sued.

• Self-employment taxes: You’ll pay both the employer and employee share of Social Security and Medicare, over 15%.

• Limited options for deductions: You may miss out on tax planning strategies available to corporations.

Jack recommends that as soon as you’re generating consistent income, you should consider forming a legal entity that offers protection and tax benefits.

An LLC (Limited Liability Company) is a popular option because it offers legal protection for your personal assets and is relatively simple to set up.

Jack emphasized one key point: An LLC is a legal structure, not a tax status. This means that while your LLC gives you liability protection, it can still be taxed in several different ways, by default as a sole proprietorship (single-member) or partnership (multi-member), or you can elect to be taxed as an S-Corp or C-Corp.

This flexibility is one of the reasons LLCs are so popular. But with flexibility comes the need for smart planning.

According to Jack, once you’re making at least $50,000 to $60,000 a year in net profit, it may be time to consider electing S-Corp status. Why?

Self-employment tax savings: As an S-Corp owner, you can split your income between a reasonable salary (subject to payroll taxes) and distributions (not subject to self-employment tax).

Tax deductions: You can potentially deduct things like health insurance premiums, retirement plan contributions, and business expenses.

However, Jack warned that with an S-Corp comes more administrative work, like running payroll and filing specific IRS forms. That’s why working with a knowledgeable CPA is key.

C-Corps are typically used by startups looking to raise venture capital or entrepreneurs planning to go public. While the flat 21% federal tax rate may seem attractive, Jack noted that double taxation, once at the corporate level and again on dividends, can eat into profits if not carefully managed.

Still, there are cases where a C-Corp makes sense, especially when reinvesting profits back into the business or taking advantage of certain fringe benefits. The key is understanding your growth goals and exit strategy.

Drawing from decades of experience inside the IRS, Jack shared a number of tax mistakes he’s seen entrepreneurs make time and again:

1. Commingling personal and business finances

This not only complicates bookkeeping but can also pierce the corporate veil, putting your personal assets at risk in a lawsuit.

2. Poor record-keeping

“If you can’t substantiate it, you can’t deduct it,” Jack reminded the audience. Keep receipts, track mileage, and maintain clean books.

3. Overpaying estimated taxes

Many entrepreneurs overpay quarterly taxes out of fear, essentially giving the IRS an interest-free loan. A solid tax plan can prevent this.

4. Failing to plan for retirement and healthcare

Jack emphasized using vehicles like SEP IRAs, Solo 401(k)s, and Health Reimbursement Arrangements (HRAs) to legally reduce taxable income while securing your future.

Beyond taxes, Jack stressed the importance of protecting your assets. Even if you’re just starting out, you’re building something valuable. Lawsuits, creditor claims, or IRS audits can undo years of hard work in an instant.

His advice?

• Use separate legal entities to hold different types of assets (like intellectual property vs. operations).

• Invest in liability insurance, but don’t rely on it alone.

• Avoid DIY legal setups. What you save upfront may cost you dearly down the line.

One of the most empowering takeaways from Jack Cohen’s session was this: You have more control than you think.

With the right structure and guidance, you can:

• Reduce your tax burden legally

• Protect your personal and business assets

• Position yourself for long-term growth and success

Tax and legal matters may not be the most exciting parts of entrepreneurship, but they are foundational. As Jack put it, “The IRS doesn’t care how great your product is, if your business isn’t structured properly, you’ll pay the price.”

Whether you’re just getting started or you’re already earning six or seven figures in your business, now is the time to take a hard look at your business structure and tax strategy.

Jack Cohen’s insights serve as a powerful reminder: knowledge is power, but applied knowledge is profit.

If you want to thrive financially, keep more of what you earn, and build a bulletproof business, don’t leave these decisions to chance. Surround yourself with smart advisors, take action on what you’ve learned, and structure your business for success.

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