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A new tax law may let family businesses keep more money in the bank.

This story appears in the June 2005 issue of Entrepreneur. Subscribe »

Family-business owners are among the winners of tax benefits under the American Jobs Creation Act of 2004. The law makes as many as 10 different changes to S-corporation rules, but the changes affecting family-business owners are considered to be among the most significant. (Experts note that the majority of family businesses are organized as S corporations.)

The major benefit of S-corp. status is that owners generally pay less in federal taxes. With an S corp., income is typically taxed only once, at the owner level. Under a regular C corporation, it's taxed twice--once at the corporate level and again at the shareholder level when it's distributed.

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